Company closure methods and their timeframes
The time it takes to close a company can vary from a couple of months to over a year. The exact timeframe depends on the closure method, the business’s size and complexity, the number of assets it has, whether it can pay its debts and how many creditors need to be repaid.
Strike Off
Strike Off, also known as Company Dissolution, is the quickest and cheapest way to close a limited company. You can only use this procedure if your business is solvent (it can pay all its debts). If the company has valuable assets to distribute to its shareholders, it’s usually more tax-efficient to use a solvent liquidation procedure called Members’ Voluntary Liquidation (MVL).
You can submit form DS01 or apply online to strike the company off the official register at Companies House. You initiate and manage the process yourself, and as long as there are no objections, the company will be removed from the register and cease to exist as a legal entity.
How long does it take to strike off a company?
It typically takes around three months from submitting your application to the company being dissolved. That includes a two-month waiting period after you have applied when creditors and other interested parties can object. You then have to wait for approval from Companies House.
However, that three-month timeframe does not account for the work you must do to wind down your business’s affairs and prepare it for strike off before submitting your application. You must pay any outstanding debts, complete all contracts and transactions, pay final employee wages, distribute assets to the shareholders, and file final accounts and tax returns. Only then can you submit form DS01 to Companies House to initiate the Strike Off process.
Members’ Voluntary Liquidation (MVL)
There are three liquidation procedures you can use to close a limited company. A Members’ Voluntary Liquidation (MVL) is the only process for solvent businesses. An MVL is a voluntary liquidation procedure you initiate by signing a Declaration of Solvency and appointing a licensed Insolvency Practitioner to liquidate the company on your behalf.
The liquidator takes control of the company and winds up its affairs. As part of that process, they value and sell its assets and use the proceeds to pay off its debts (if it has any). They then distribute the remaining profits among the company’s shareholders before removing the company from the Companies House register.
The benefit of an MVL over Strike Off is its tax efficiency. In an MVL, all the proceeds are taxed as capital, whereas in Strike Off, you pay Income Tax on profits over £25,000. You may also be eligible for Business Asset Disposal Relief, which can reduce your tax bill significantly.
How long does Members’ Voluntary Liquidation take?
A relatively simple Members’ Voluntary Liquidation (MVL) typically takes three to six months. However, it can take up to a year for larger businesses with lots of assets or more specialist assets that can be difficult to sell.
The exact timeframe depends on how quickly and efficiently the liquidator can notify creditors, sell assets and settle the debts. Returns can be paid to directors and shareholders in as little as three months, but the full closure of the company usually takes longer.
Creditors’ Voluntary Liquidation (CVL)
Creditors’ Voluntary Liquidation (CVL) is the most common form of liquidation in the UK. It is a voluntary procedure for closing insolvent companies that cannot pay their debts.
Like an MVL, you initiate the procedure by appointing an Insolvency Practitioner to act as the liquidator. They take control of the company, wind down its affairs and sell its assets. In this case, the proceeds are used to repay the company’s creditors in a strict order. When the money runs out, the remaining debts are written off and the company is closed down.
How long does Creditors’ Voluntary Liquidation take?
You can enter into a Creditors’ Voluntary Liquidation within a couple of weeks. From that point, it can take anything from six to 12 months, depending on the size and complexity of your business and the number of creditors it has.
A Creditors’ Voluntary Liquidation usually takes longer than an MVL because the liquidator has to spend more time gathering information from the creditors, verifying debts and distributing the funds fairly. There may also be disputes they have to resolve. The liquidator is also required to investigate the reason for the company’s failure and the conduct of the directors in the period leading up to the insolvency, which can take time.
Compulsory Liquidation
Compulsory Liquidation is the only liquidation procedure you do not enter voluntarily. Instead, you are forced into it by a creditor who petitions the court to wind up your business due to an unpaid debt. If the court finds in favour of the creditor and issues a Winding Up Order, a government liquidator known as the Official Receiver will be appointed to liquidate the company.
They will invite claims from your creditors and sell the company’s assets to repay them. Any remaining debts will be written off and the business will be struck from the Companies House register. They will also investigate the director’s conduct and the business’s activities, and any evidence of misconduct or unlawful trading could lead to penalties.
How long does Compulsory Liquidation take?
This liquidation procedure can take over a year to complete. That’s due, in part, to delays caused by the legal intervention. You have seven days to respond once a creditor has issued you with a Winding Up Petition. You’ll also receive at least 14 days’ notice of the court hearing. If the court issues a Winding Up Order at the hearing, an Official Receiver will be appointed and the liquidation process will begin.
Don’t Fall Foul of Unqualified AdviceHow long will it take to close my company?
That depends on your business’s circumstances and the company closure method you use. If you’re thinking of closing your company, please contact our team of Insolvency Practitioners. We will assess your situation, discuss your options and provide practical assistance to make the process easy from start to finish. Get in touch for a free, same-day consultation or arrange a meeting at one of our offices throughout the UK.
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With multiple offices across the UK and a vastly experienced team of business closure experts, you are never far away from the advice you need. Our Licensed insolvency practitioners provide free consultations to all directors and shareholders, and can quickly ascertain which closure method is best for your business.
We are licensed by recognised professional bodies and have helped thousands of directors over many years. Contact us today for your free company closure consultation.
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