Updated: 4th January 2021
There are many reasons you may decide to liquidate a company and the truth is that it costs money to put a company into liquidation.
If you’re concerned about the costs involved, the first thing you need to do is speak to your accountant or an insolvency practitioner to establish if you need to formally liquidate the company or whether you may be able to dissolve the company and apply to have it struck off at Companies House. If this is the case, you’ll need to seek advice to make sure that you do this is done correctly, but dissolving the company and being struck off allows you to close the company without the need for a formal liquidation and it’s much less costly. However, if the business is struggling and can’t pay its debts, then you may need to consider a formal insolvency liquidation procedure, which will need to be handled by an insolvency practitioner.
A Creditors Voluntary Liquidation (CVL) is one of the most common ways of closing a limited company, particularly when it can’t pay its debts. The decision to enter a CVL is made by the company directors, rather than a compulsory liquidation being forced on them by a creditor. Choosing a voluntary liquidation, rather than waiting for a compulsory liquidation, will initially be more expensive as you’ll have to pay the liquidator’s fees, but it puts you more in control of the process and can be far less costly and less stressful for you in the long-term. If you wait for a compulsory liquidation there are greater risks of being investigated for wrongful or fraudulent trading and if found guilty you could become personally liable for company debts.
Try and find out what fees are charged by different insolvency practitioners. This will give you better bargaining power when choosing one go with. Speak to your chosen insolvency practitioner about what their fee structure is and the likely costs involved. Some may work on a fixed fee basis, while others will have varying fees depending on the particular case. Often you can negotiate to some degree to get the best deal for you, maybe by agreeing to cap the fees at a certain level.
If your company enters a liquidation procedure, then the assets and sometimes the trade and work-in-progress will be sold. If this is to a trade buyer that you’re willing to work with after the sale for a smooth handover, then the buyer may be willing to contribute towards the cost of the liquidation.
Otherwise, can you raise the money through selling some of your personal assets or through personal finance? You may have to trade-in your car for a smaller one, or forgo a family holiday in order to raise the money for your fees, but this may be a small price to pay in the long-term. Also consider whether you could you raise finance in the form of a personal loan or credit card. This depends on your personal circumstances and credit rating. The company may be in financial trouble, but this may not impact your ability to raise credit personally. Our extensive office network comprises 101 offices across the UK with a partner-led service offering immediate director advice and support.
13th April 2021
Around 40 per cent of all exporters from the UK have reported experiencing a downturn in their sales since the beginning of this year.Read More
8th April 2021
Retailers in the UK are generally against the idea of having customers be required to present paperwork as evidence of being vaccinated against Covid-19.Read More