What-if-I-can’t-afford-to-liquidate-my-limited-company

How to liquidate a company with no money? 

Placing a company into liquidation carries a price tag. Liquidation is a formal process for handling insolvency. It involves a licensed insolvency practitioner. 

If you’re a director opting for liquidation, you’re accountable for paying these professional fees.

 

Can you use company assets to fund liquidation? 

One positive aspect is that often, liquidations are financed by the company’s assets. These might include cash in the bank, outstanding invoices, inventory, vehicles, or machinery.

If your financially troubled company possesses adequate assets to settle the insolvency practitioner’s fees, you won’t have to contribute personally to the liquidation proceedings.

 

What are the alternatives to liquidation in case you have no money?

If your company lacks enough assets to meet the liquidation expenses, and you’re worried about funding its closure, consult with an insolvency practitioner. 

They can advise whether formal liquidation is necessary or if you could dissolve the company and apply for it to be removed from Companies House records.

This might occur if the company doesn’t owe substantial debts to creditors. Choosing dissolution and being struck off permits you to close the company without formal liquidation, which is more cost-effective.

Yet, if the business is struggling with debt repayment and unable to meet its obligations, then you must contemplate a formal insolvency liquidation process. This must be overseen by an insolvency practitioner.

 

Exploring the differences between Compulsory liquidation & Voluntary liquidation

A Creditors Voluntary Liquidation (CVL) stands as one of the most frequent methods for shutting down a limited company, especially if it’s unable to settle its debts. 

The choice to undergo a CVL rests with the company directors, and consequently, they bear the responsibility for covering the liquidator’s fees.

In a compulsory liquidation, it’s not the company’s directors who commence the process but rather its creditors. As a result, in a compulsory liquidation, the fees are covered by the creditor who petitions for the liquidation.

Although relying on a creditor to liquidate your company due to a lack of funds might appear tempting, we strongly advise against pursuing this route.

If you wait for a creditor to trigger liquidation proceedings, you refuse all control, and there’s no assurance that a creditor will indeed initiate such action against your company. Consequently, your company may persist as active despite being technically insolvent.

Trading while knowingly insolvent heightens the risk of being investigated for wrongful or fraudulent trading. If found culpable, you could become personally accountable for some or all of the company’s debts. 

 

What are the payment processes for the insolvency practitioner’s fees?

If you’re finding it challenging to cover the expenses of liquidating your company, discuss with your selected insolvency practitioner about their fee arrangement and the anticipated costs. Some may operate on a fixed fee basis, while others may have fees that fluctuate based on the specifics of the case.

Frequently, there’s room for scope to secure the most favourable terms, such as agreeing to cap the fees at a specified level or opting to pay the fees in instalments rather than in one lump sum.

 

Using personal funds to pay for the liquidation

If your company can’t afford the liquidation fees, you might have to consider raising the funds yourself by selling some of your personal assets or obtaining personal finance. 

This could mean downsising your car or skipping a family holiday to cover the fees, but it could be a worthwhile investment for the future.

 

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How Vanguard Insolvency can help you?

If you’re concerned about affording the closure of your company, it’s crucial to prioritise speaking with a licensed insolvency practitioner to gain a clearer understanding of your options.

At Vanguard Insolvency, our extensive network includes offices across the UK, providing director advice and support on an immediate basis

Our partner-led service ensures tailored assistance. Your initial consultation is entirely free, offering valuable insights into your options for closing your business and financing the process.

Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.