What is the cheapest and quickest way to liquidate a company?

What is the cheapest way to close my limited company?

Choosing to liquidate a company is rarely easy, and that decision becomes all the more difficult when you learn about the costs involved. Liquidation is a formal legal process, so you need the help of a licensed Insolvency Practitioner to administer it. You must pay their professional fees and the costs associated with the process. You must also pay tax on the money you take out of the business. All that may sound expensive, but with the right advice, it doesn’t have to be.

Here we outline the steps you can take to achieve a cheap and quick company liquidation. We also look at the various ways you can pay for it. As an example, directors who liquidate their insolvent limited companies could be eligible for director redundancy pay averaging around £9,000. That can cover the cost of the liquidation process and give you some breathing space in the future.

What is the cheapest way to liquidate my limited company?

Although there are fees involved, it is possible to liquidate your limited company for a relatively low cost. However, depending on your circumstances, a more cost-effective alternative to company liquidation may exist. Speaking to a licensed Insolvency Practitioner at your earliest opportunity will help you fully understand your options.  

The cheapest way to close a solvent company

• Company Dissolution

If you want to close a profitable company that can pay all its debts, you do not have to use a liquidation procedure. Instead, you can close it yourself using Company Dissolution. 

You don’t need the help of an Insolvency Practitioner to close a company via dissolution, so no professional fees are involved. You can initiate the process by applying online and paying a small fee. Although that sounds great in practice, the issue with this closure method is how the money you take out of the company is taxed. That could make dissolving your company a lot more expensive than solvent liquidation in the long run.

• Members’ Voluntary Liquidation (MVL)

Members’ Voluntary Liquidation (MVL) is a voluntary procedure you can use to close a solvent limited company. It costs around £1,000 but can rise to £3,000 or £4,000 depending on the complexity. That covers the Insolvency Practitioner’s fee and the costs associated with the process. However, while the upfront costs are significantly higher than Company Dissolution, it brings significant tax benefits. 

All the profits you receive from the company when you close it via an MVL are subject to Capital Gains Tax (CGT). You may also be eligible for Business Asset Disposal Relief, which reduces the rate of CGT to just 10% for higher-rate taxpayers. On the other hand, if you dissolve your company, you pay income tax on any profits over £25,000. That makes liquidation a much more cost-effective way to close solvent limited companies with a high value of retained profits.

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The cheapest way to close an insolvent company

• Compulsory Liquidation 

In terms of the upfront cost, Compulsory Liquidation is usually the cheapest way to liquidate an insolvent limited company. However, there’s also a greater risk of serious repercussions for the directors and higher costs in the long term. 

You cannot enter Compulsory Liquidation voluntarily. Instead, you must wait to be forcibly wound up by a creditor. The court will appoint a liquidator to wind up the company and you will not have to pay the liquidator’s fee. However, the procedure does bring added scrutiny and the liquidator will investigate your role in the company’s failure. That could lead to fines, personal liability for company debt, disqualification as a director for up to 15 years and potentially even a prison sentence. 

• Creditors’ Voluntary Liquidation (CVL)

You cannot simply dissolve an insolvent limited company. The main way to close it voluntarily is via a Creditors’ Voluntary Liquidation (CVL). Creditors’ Voluntary Liquidation is typically more expensive than solvent liquidation as it brings additional work for the Insolvency Practitioner. A straightforward CVL is around £3,000, but despite the costs, it’s usually the safest and cheapest way to close an insolvent company in the long run.

Acting as the liquidator, the Insolvency Practitioner will sell the company’s assets and repay its creditors as far as possible before closing the business down. Any remaining debts will be written off. Initiating a CVL shows that you are taking your legal duties as a director seriously, reducing the risk of adverse consequences or costs for you personally. You may also be eligible for director’s redundancy pay, which can cover the cost of the liquidation procedure if the value of the company’s assets is insufficient.

How can I pay for a low-cost liquidation?

A benefit of liquidation is that there are several ways to pay for it. That gives you options and can prevent you from having to dip into your savings.

• Sale of assets - As part of a solvent or insolvent liquidation, the liquidator will market and sell the company’s assets. The money raised is used to pay the liquidator’s fees before it is distributed to the company’s creditors or shareholders.
• Director’s redundancy payment - Directors who have worked for an insolvent company for at least two years are entitled to redundancy pay. If the sale of company assets does not cover the liquidator’s fee, the directors can use this sum to pay for the procedure.
• Personal funds - If your company is insolvent, its assets do not cover the cost of liquidation and you are not eligible for a redundancy payout, you may have to pay for the liquidation using your own funds. Splitting the fee between multiple directors can still lead to a low-cost liquidation and reduce the risk of fines and personal liability issues associated with Compulsory Liquidation. 

How do I liquidate my company quickly?

If your company is solvent, the fastest way to close it is via Company Dissolution. The process typically takes two to three months, although it will require some preparation. However, if your business has significant assets, Members’ Voluntary Liquidation (MVL) is more tax-efficient. In straightforward cases, an MVL can be concluded in a few weeks, although most cases are finalised in three to six months.

The quickest way to liquidate an insolvent company is to initiate a Creditors’ Voluntary Liquidation. You get to decide when you start the procedure and choose the liquidator. It prevents creditors from chasing you for money and enables you and your employees to claim redundancy payments more quickly. You can put a company into insolvent liquidation in as little as 14 days, and it usually takes around six months to complete.

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Achieve a cheap and quick company liquidation

It is possible to liquidate a limited company cheaply and quickly, even if it’s insolvent. The first step is to contact a team of licensed Insolvency Practitioners. With over 30 years of experience, we will help you understand exactly where you stand and what your options are before guiding you seamlessly through the process. Get in touch for a free consultation or arrange a meeting at one of our offices throughout the UK.