How long does voluntary liquidation take to acquire?

A members’ voluntary liquidation is a procedure for settlement of those companies, which are not insolvent. A good question for this should be, how long does voluntary liquidation take?

Usually, liquidation is considerably the last step for those companies, which are bankrupt and can no longer pay their debts. When such a situation is evident, the company liquidates, and its assets are sold off to pay the debts. However, it is not necessary that the company be insolvent to undergo the process.

If the members of the company feel that they do not wish to continue the operations of the company in the future, they can opt for a VML to liquidate the company. Also, if the company is incurring losses, but it is still solvent, or if the members cannot agree upon the future of the company, a VML can be a good option. Therefore, in this way, it is the opposite of a compulsory liquidation. An MVL is only possible if the company has enough funds to pay off all its debts. The company must be solvent, meaning that it must be in the position to pay off its debts in twelve months.

How long does voluntary liquidation take? The liquidation process starts with a formal resolution to wind up the company. This resolution occurs at a company meeting where the financial position of the company is under discussion. At this board meeting, a resolution of the board is evident in which; a decision becomes available on whether it is viable to liquidate or not. The decision to appoint a nominated liquidator is among them. The resolution will be passed only if seventy-five percent of the members agree to it.

After this, within five weeks of the resolution, a formal declaration of solvency should be produced. The Declaration of Solvency is a proof of the solvency position of the company and contains details about the assets and liabilities of a company. It is evident that the company can pay creditors together with statutory interest within a maximum of 12 months.

After the necessary legal procedures are complete, the liquidator is then responsible for valuing the assets of the company, to sell them off, or distribute them amongst the shareholders, and members. When the liquidator is appointed, the authority of the directors ends, although the liquidator will consult them in all the matters. An MVA process lasts as long as it takes the company to complete all the mentioned legal proceedings.

An MVA is beneficial for the shareholders, as they can get back the investment that they made in the business. Either the liquidator will distribute the assets of the company to the shareholders, or he will sell them off, and distribute the cash.

It is essential to ascertain beforehand that the company is, indeed, solvent, and can pay off its debt within a year. If within the liquidation process, it is evident that the company is not financially stable, then the directors can face legal action, and they may appear in court.

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