How much does it cost to close or liquidate a limited company?

How much does it cost to liquidate a company?

The average cost for winding up an insolvent company through a Creditors’ Voluntary Liquidation (CVL) differs depending on the company’s specific circumstances. Typically it falls between £4,000-£6,000 as a rough estimate.

 In case the company is insolvent, you have the option to shut it down through a Members’ Voluntary Liquidation (MVL) or to seek its removal or dissolution through Companies House.

 

How much does it cost to close a limited company through strike-off?

If your company is debt-free and has relatively few assets for distribution, you may choose to close it using the strike-off method. This entails applying to have the company dissolved through Companies House.

The fee for closing a limited company via the strike-off option is only £8 when applying online. Nevertheless, it’s essential to confirm that your company meets the necessary criteria before proceeding with the dissolution application.

 

How much does it cost to liquidate a limited company?

The cost of liquidating a company isn’t fixed, as fees fluctuate based on the complexity and time invested in closing the business. Only a licensed insolvency practitioner can conduct company liquidation, serving as the appointed liquidator. It’s the expertise of this professional that largely influences the total cost. Plus, complex cases demand additional time, leading to higher fees.

Typically, anticipate paying approximately £4,000 – £6,000 + VAT for a simple liquidation of an insolvent company with minimal debtors, few assets, and no ongoing litigation through a Creditors’ Voluntary Liquidation (CVL). However, more intricate cases may incur higher fees.

The cost of a Members’ Voluntary Liquidation (MVL), used for closing solvent companies, is usually less than that of a CVL. However, this can still vary depending on the extent of work needed.

 

Who will pay for the liquidation of a company?

In voluntary liquidation, the company covers the costs of the liquidation process. However, in cases of compulsory liquidation, the fees are typically covered by the party petitioning for the winding up of the indebted company.

If your company is insolvent, you may stop trading and await compulsory liquidation initiated by one of your creditors. Remember, as a director of an insolvent company, you’re legally obliged to prevent further losses and refrain from actions that could worsen your creditors’ position.

Permitting the company to trade while aware of its insolvency constitutes a breach of directorial duties and may result in various penalties. You could become personally liable for company debts or face disqualification from future directorial roles.

Simply, if your company is insolvent, it’s imperative to take prompt action and seek guidance from an insolvency practitioner for tailored assistance and advice.

 

What are the processes for paying the fees for liquidation fees?

As part of the liquidation procedure, the liquidator is tasked with identifying company assets, arranging their valuation, and then utilising these funds to benefit outstanding creditors. The liquidation fee is usually deducted from these company assets.

It’s crucial to understand that assets encompass not only the company’s cash reserves but also tangible assets like property, vehicles, and machinery, along with intangible assets such as outstanding recoverable debtors.

Just because your company lacks funds in the bank doesn’t imply there aren’t ample assets elsewhere in the business to cover liquidation expenses.

The legal order of payment is outlined by law, and the liquidator must adhere to this when distributing assets. Given the essential role of an insolvency practitioner in initiating company liquidation, their professional fees are considered a priority and are the first to be settled from company assets.

In solvent liquidations, funding from company assets typically isn’t an issue since the company possesses substantial cash reserves from which to draw. Nonetheless, with insolvent companies, there are situations where the company lacks adequate assets to cover the entire cost of liquidation.

 

What if my company cannot afford to pay for the liquidation?

If a company lacks funds or assets to cover the liquidation expenses, the responsibility falls on the directors to cover the costs or make up the shortfall on behalf of the company. 

If you’re unable to afford the full liquidation fee upfront, you might negotiate paying it on a contingency basis. However, this arrangement needs to be discussed with the liquidator during your initial conversations.

 

How can I pay the company liquidation fees?

Take note that, any outstanding overdrawn director’s loan will be considered an asset of the company. It’s the responsibility of the appointed liquidator to collect this from you as part of the liquidation process.

An overdrawn director’s loan signifies funds withdrawn from the company without being recorded as either salary or dividend payments. 

Consequently, you’ll be required to repay this sum into the business bank accounts once the company undergoes liquidation, akin to any other outstanding creditor.

You might negotiate with the liquidator to have the repayment of the overdrawn director’s loan offset against the liquidation fees. The appointed insolvency practitioner can assess the feasibility of this based on the amount of your overdrawn director’s loan and your capacity to repay it to the company.

As a director of a limited company, if you receive a regular salary from the business through the PAYE system, you may also be considered an employee. In such cases, you might be eligible for a redundancy payment if your insolvent company undergoes liquidation. This could offer valuable financial support during a challenging period.

 

Read More: 

• Preference Payments in Liquidation: Understanding Section 239
• What are creditors’ rights in a liquidation process
• What does folding a business mean
• What happens to a company after a liquidator is appointed
• What happens to your pension if your employer goes into liquidation

 

Need help to liquidate your company?

If you’re thinking about closing your limited company, whether solvent or insolvent, it’s crucial to seek specialist advice as soon as possible. Consulting with a licensed insolvency practitioner will assist you in comprehending your options, as well as your legal duties and responsibilities as the director of a limited company.

They can inspect your business, discuss available options, and recommend the best course of action.

You can schedule a free, no-obligation consultation with a licensed insolvency practitioner at any of our offices. Alternatively, contact our expert team today.