Written ByKeith Steven
Turnaround Director
Keith is the Managing Director of RMT KSA Insolvency Practitioners which has been established for 25 years. The company has undertaken more CVA led rescues than any other firm. Read our case studies to see how.
Liquidating a company can feel like a daunting and complex process – after all, it’s a regulated procedure that involves meeting legal and financial obligations. Whether you’re dealing with mounting debts or simply looking to close down a business that’s no longer viable, it’s crucial to handle liquidation properly to avoid complications further down the line. A well-managed liquidation will guarantee that creditors, employees, and other stakeholders are treated fairly and that as the director, you fulfill your responsibilities under the law.
The cheapest we can liquidate a company for is £4000 + VAT. This would be for a company with only a couple of creditors such as HMRC and a Bounce Back Loan. While this cost may seem significant, it’s important to view liquidation as more than just an expense; it will give you a clean slate and protect you from legal or financial problems in the future. Taking shortcuts or ignoring the rules can lead to much greater costs in terms of stress, fines, or potential legal action.
That said, if the cost of liquidation feels out of reach, don’t panic; there are other options available that could be more cost-effective, depending on your company’s situation. A licensed insolvency practitioner can run you through these options and ensure you make an informed decision that aligns with your circumstances.
While liquidation is often associated with significant costs, there are ways to reduce expenses and, in some cases, achieve a “cheap liquidation”. Here are the most common methods:
If your company has assets, you can sell them to generate funds for the liquidation process. The proceeds will be used to pay creditors and cover the fees of the licensed insolvency practitioner, in order of priority; this allows the liquidation to be done cheaply.
Directors of insolvent companies may qualify for redundancy payments throughHMRC’s Redundancy Payments Service, if you have been on the company payroll under PAYE. These payments can help cover the cost of liquidation, making it cheaper overall.
One way to avoid direct costs is to allow a creditor to petition the court to forcibly liquidate your company. While this is technically the cheapest option for directors, it does come with serious downsides. It’s a lengthy process with additional legal complexities, and the court will appoint a liquidator who is independent and has no prior relationship with you. In addition, the court appointed liquidator is more likely to pursue you for debts you owe to the company due to the simple fact they are not restricted by how much money is in the case. This is the only way you can liquidate a company with no money.
If your company has no assets and owes no significant debts to creditors, you may be able to dissolve it by applying to strike it off the Companies Register. This is the simplest and cheapest route, but it’s only legally viable if your company does not owe substantial money to creditors, nor has any outstanding legal actions.
It’s important to note that dissolving a company with unpaid debts can lead to creditor objections and legal consequences, making this route inappropriate for many insolvent businesses.
You can only really liquidate a company with no money if you allow for it to be wound up.
The insolvency industry does sometimes get bad press, mainly because there are some unscrupulous advisors out there who purport to help business people in a vulnerable position, when all they want to do is rip you off!
The most common scams occur in the debt management market. For instance, people are persuaded to hand over large amounts of cash to their “advisors” who will negotiate on their behalf with creditors for a fee.
Another common one is the “insolvency specialist”, offering to liquidate or pre pack your business very cheaply. All they are doing is taking a fee to then refer you to an actual Licensed Insolvency Practitioner who will liquidate your company for an additional fee. ONLY a licensed insolvency practitioner can put the company into voluntary liquidation AFTER creditors have appointed him or her. Also, disbursements may not be included in the quote that could be in excess of £1000. Some companies will say they liaise with creditors but all they do is send a letter out and that is it and will not answer any calls. So they will end up calling you instead. Best get a proper professional IP to do the job properly. This will save you time, worry and stress.
If you’re looking into how to close a limited company, how to liquidate a company, or dissolve a company, it’s important to steer clear of unethical practices. Unfortunately, some advisors or operators offer misleading solutions that can land you in legal trouble; below are common dubious practices you should watch out for.
Some operators may offer to buy your business as a supposed alternative to liquidating a company. This is not a legitimate process and is, in fact, unlawful; the Insolvency Service has been shutting down operators who engage in this practice in the public interest.
Here’s what really happens. If you sell your company through these schemes, it will eventually face a court-ordered winding up process which can severely harm your reputation and future business prospects. Remember, there’s no shortcut to closing a company properly and you should always follow a legal and transparent procedure. See this page on this scam
In England and Wales, some advisors may suggest a court-driven liquidation process as a solution. This process, sometimes called a directors’ petition, involves directors paying to wind up their own company in court.
While some courts may accept this method if the directors are also creditors, others view it as an abuse of court processes and will reject it outright.
Legitimate liquidation, such as a Creditors’ Voluntary Liquidation, should always be handled by a licensed insolvency practitioner. If someone proposes court liquidation as a quick fix, take this as a red flag.
Another unethical practice is advising you to simply dissolve the company when significant debts are involved. While dissolving a company, via Companies House, might sound straightforward, there’s a catch.
Creditors, including HMRC, can object to the dissolution process if there are outstanding debts.They typically reject dissolution applications, even if the debts are relatively small (e.g., a few thousand pounds of unpaid taxes).
If an advisor claims you can dissolve your company while ignoring debts, they’re providing flawed and potentially harmful advice. A proper liquidation process is usually the most appropriate route for closing an indebted company.
Some advisors may suggest that directors’ redundancy payments can cover the costs of liquidation. While directors can, in some cases, claim redundancy pay, there are strict conditions:
In reality, this situation is quite rare. Promises that redundancy will settle everything are often misleading and should be treated with caution.
Some advisors may push you into a particular insolvency process and often without explaining all your options. For example, Pre Pack Administration can look appealing because it allows directors to potentially buy back the company’s assets while shedding debts.
However, the process is far more complex than advertisements often suggest. Pre pack sales require assets to be independently valued by a Chartered Surveyor. Additionally, banks often reject pre-pack sales to businesses connected to the original directors, especially if there’s a history of financial mismanagement. Aside from anything else, selling company assets at a price below their market value is illegal and can result in serious legal consequences.
A reputable advisor will present all your options, including alternatives like a Company Voluntary Arrangement or a Creditors’ Voluntary Liquidation. If they’re not discussing these with you, they’re not providing proper advice.
One of the most common scams occurs in the debt management market, where advisors promise to negotiate with creditors on your behalf for a hefty upfront fee. In many cases, these advisors fail to deliver meaningful results, leaving you out of pocket with the same financial problems. Be wary of any service that demands large payments upfront without clearly explaining what they will do or providing proof of their qualifications.
Additionally, some advisors claim they’ll handle creditor communications for you, but all they do is send out a basic letter. When creditors try to follow up, they often can’t get through to the advisor and end up contacting you instead, leaving you to deal with the stress they promised to resolve.
Another common practice involves so-called “insolvency specialists” offering to liquidate or pre-pack your company at a bargain price. These middlemen typically charge a fee only to refer you to a licensed insolvency practitioner, who will then charge their own fees for completing the liquidation. This ends up costing you more in the long run, especially as many of these advisors fail to mention hidden costs like disbursements, which can exceed £1,000.
To avoid these traps, always work with a licensed insolvency practitioner, as only they can legally place a company into voluntary liquidation. A qualified IP will also ensure you fully understand all your options, whether that’s liquidation, a pre-pack administration, or alternatives like a Company Voluntary Arrangement, to help you work out what’s best for your business.
To avoid costly mistakes, here’s how you can protect yourself and find trusted support when closing your company:
First and foremost, make sure the firm you’re dealing with employs Licensed Insolvency Practitioners. While anyone can call themselves an “insolvency specialist,” only licensed professionals are legally qualified to oversee liquidation and insolvency processes.
The following regulatory bodies oversee Licensed Insolvency Practitioners in the UK:
In addition, under the Insolvency Act 1986, the Secretary of State for Business, Enterprise, and Regulatory Reform or the Department of Enterprise, Trade, and Investment in Northern Ireland can also authorise IPs.
Note that you can still be a member of the Institute of Chartered Accountants and not actually be licensed to be an insolvency practitioner. Always make sure to verify their status through the regulatory body.
A company’s reputation and experience matter. Look them up on Companies House, check for testimonials or case studies on their website, and, if possible, ask for references. Be wary of firms with limited information on their About Us page, especially if it lacks details about the people behind the business and instead provides only generic phone numbers or email addresses.
When dealing business-to-business, it’s important to recognise that you don’t have the same protections as consumers. Unlike individuals, businesses are not covered by the Consumer Protection Act 1987 or regulations like cooling-off periods or distance selling rights. If you sign a contract with a firm, you may have little options if things go wrong. It’s your responsibility to do thorough research and caveat emptor (buyer beware).
If you’re looking to liquidate your company affordably and safely, it’s vital to work with a firm that’s upfront about costs and processes. We specialise in helping all kinds of businesses through the liquidation process.. For free, confidential advice, call us at 0800 9700539 Or, visit our sister company Liquidate My Company who can provide you with an estimate within the hour and prioritise transparency, allowing you to make an informed decision.
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My Business Is Failing – How Can I Save It?
My Business Is Failing – How Can I Save It?