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How Much Does It Cost To Liquidate A Company?

17th February, 2023

Written ByWayne Harrison

Director and Licensed Insolvency Practitioner

07879 555349

Wayne works with business owners and their stakeholders across all businesses from SMEs to large companies. Primarily focussed on helping businesses to restructure and survive he also has extensive experience of liquidations and administrations in every sector. He has overseen the successful sale of London and Birmingham based law firms, has handled the administration of several haulage firms and worked extensively with a National food retailer to ensure its supply chain was not disrupted when a key delivery haulage contractor entered administration.

Wayne Harrison
  • How Much Does A Liquidation Cost?
  • When Should I Consider Voluntary Liquidation?
  • What’s Included in the cost of voluntary liquidation?
  • How do companies pay for voluntary liquidation?

Voluntary liquidation is an effective way to close an insolvent company.   If your company is insolvent, then you are likely to be concerned about the costs of liquidation.

The cost of liquidation depends on the complexity of the case.  This is based on factors such as;

  • Whether the company is trading or not.
  • Number of employees
  • Number of creditors, and how much it owes them
  • Value of its assets, including money it is owed by debtors
  • Director and shareholder profile
  • The quality of the financial information available.

How Much Does A Liquidation Cost?

Generally, the costs of liquidation start at around £4000 + VAT. This would be for liquidating a company with a single creditor, such as having an unpaid Bounce Back Loan (BBL) or HMRC. For more than one creditor issue, we would expect the fee to be approximately £4,000 – £6,000 plus VAT. For more complex issues including companies who have landlords, employees, BBLs and supplier debts we will provide a written quote after our meeting with the directors to discuss the company’s options. Do get in touch to discuss your company’s liquidation, don’t delay and hope the problem will go away!

Be wary of websites (not actual insolvency practitioners) saying they can do it for £1500 or so – this is for sure, too good to be true. The cost of the liquidation may be lower but the risk to you personally is very high, especially if you owe the company any money. Additionally, you will probably end up dealing with all the creditors and will find it difficult to move on.  Liquidation is heavily regulated and there are no shortcuts.   You may also be asked to sign personal guarantees.

Here, we’ll explain how much voluntary liquidation costs, so you know exactly what to expect if you’re in a situation where you need to consider it.

When Should I Consider Voluntary Liquidation?

Voluntary liquidation is when a company’s directors choose to close the company down and disband. The process is quite straightforward:

  • First, the company appoints a licensed insolvency practitioner as the liquidator,
  • Then, control of the company is handed to the liquidator and the business ceases to trade,
  • The liquidator sells all of the company assets,
  • The liquidator removes the company from the Companies House register.

There are two core types of voluntary liquidation, so it’s important to understand which one your company is facing.

  1. Members’ voluntary liquidation – This occurs when the company has enough assets to cover its debts. The directors must make a declaration of solvency before proceeding.
  2. Creditors’ voluntary liquidation – This is a popular method for closing down insolvent businesses. 75% of creditors must agree with the liquidation proposal put forward at a creditors’ meeting.

It is important that directors assist their liquidator in all areas. They must hand over company assets, records and paperwork, and agree to interviews if requested.

In a creditors’ voluntary liquidation (CVL) it’s important to remember that the liquidator acts in the interest of the creditors, not the directors. If the liquidator finds that a director’s conduct was ‘unfit’, the director could face fines, or even disqualification for 2-15 years.

What’s Included in the cost of voluntary liquidation?

This covers the cost of hiring an insolvency practitioner to act as liquidator and organise the creditors’ meeting. It also includes the preparation of the statement of affairs and section 98 reports.

Further liquidation costs will accrue as the process moves forward. This is because the liquidator will perform a wide range of duties during this time, which include:

  • Advising directors of their duties
  • Settling legal disputes or outstanding contracts
  • Making people redundant and processing their claims
  • Collecting debts, including those owed by company directors
  • Meeting deadlines for paperwork and keeping the relative authorities informed i.e. Companies House, HMRC, Insolvency Service and Department for Business, Energy, Innovation and Skills
  • Investigating transactions prior to the liquidation to check for discrepancies and obvious preferences/undervalued transactions
  • Alerting creditors to progress every 12 months and involving them in decisions where necessary
  • Valuing and realising assets
  • Distributing monies to creditors and accounting for them

The cost of voluntary liquidation – excluding the initial fee – is charged according to time spent, usually over a period of five years.

How do companies pay for voluntary liquidation?

Proceeds from the sale of the company’s assets usually pay the costs for three different areas:

  1. The cost of voluntary liquidation
  2. Money owed to creditors
  3. Shareholder debts

However, the second and third tier only receive funds after payment of the cost associated with the previous tier. Therefore, as the process continues, it could become increasingly unlikely that shareholders will receive the full amount owed to them.

Sometimes, the cost of voluntary liquidation cannot be met through the sale of assets. In such cases, liquidators will require payment in advance.

When this occurs, or directors require a more efficient process, directors often pay for liquidation out of their own funds.

The cost of voluntary liquidation can be daunting, but this process is the correct way to close an insolvent company and stop the position getting worse. It can help protect directors from wrongful trading accusations, stop the risk of personal liability, ensure all staff are paid compensation quickly and perhaps most importantly spare the director time to get on with their life.

If you think that voluntary liquidation might be right for you, talk to our experts at Company Rescue today.

Worried Director What Will Happen To Me After Liquidation?

in Company Liquidation What is …?

"A man in the pub said I cannot be a director of any other company if I liquidate my company. Is this true?"Actually, this statement is entirely false! Misconceptions like this frequently arise from individuals with limited understanding of the subject matter. Such misinformation can cause undue anxiety for directors considering liquidation, fearing it might personally affect them. Guess what? Listening to bar room experts, inexperienced accountants, or no insolvency specialist lawyers can stop decisions being made, this failure to make a decision is really what could land you in trouble. So how will liquidation affect me and how long does it take? Having a limited liability company means that the directors have little risk (or limited liability) if the company fails, as long as they have acted properly and acted in time. What is more, if as a director, you have been compliant and on the payroll for many years, you can actually claim redundancy from the government like any other employee. But, and it is a big but, if you fail to act in time, fail to act reasonably, fail to keep books and records, continue taking credit KNOWING that the company cannot possibly repay it, then you ARE at risk of personal financial loss or worse such as losing your house. So, act now and get help for your company and more importantly start reducing your own risks.Voluntary liquidation is the quickest most efficient way to deal with an insolvent company that has no future. As a director of an insolvent company, you are at risk if you do not act. This risk RISES the longer you don't act to put the company into liquidation.If you fail to act and the company is wound up by the creditors (compulsory liquidation) then the Official Receiver (OR) will be appointed to liquidate the business and he or she will investigate the activity of the directors and the business over the last 2-3 years. This is known as a conduct report on each director.  If the OR can prove there was wrongful trading where, for instance, you have taken credit from a supplier or took deposits from customers when you knew that it was highly unlikely that you could pay them back, then you could be made personally liable.This is known as the "lifting of the veil of incorporation" that protects directors under limited liability. If this happens then you could made liable for PAYE, VAT and creditors monies from the time that you should have known the company had no reasonable prospect of surviving the problems it faced.Additionally, the directors may face disqualification proceedings under the Company Directors Disqualification Act 1986 for up to 15 years, they can be fined and may face the loss of personal assets like your home, or even personal bankruptcy.Look, if you as directors have acted naively you may not know that you have broken these laws, but now you do know, it is vital to ensure that you protect yourself as a director by acting quickly to cease trading and put the company into voluntary liquidation; or consider a company voluntary arrangement if the company is VIABLE if the problems are solved. What is Creditors Voluntary Liquidation and what does it mean for me? In short, liquidation usually means, the company's trading stops and it's assets are turned into cash or "liquidated".All other possible liabilities, like employment liabilities, landlord's rent or payments to lease companies are stopped. It really is the end of the company, but the "business" may survive if a phoenix is organised. Liquidation is a powerful way to END creditor pressure and let you get on with your life. What if I have signed personal guarantees? If you have signed personal guarantees or indemnities to lenders, then the liquidation could lead to them being called in if the bank cannot get its money back from the company. There is little that can be done about that, but you should not delay decisions on liquidation to try and prevent a PG being called in: just think what ALL of the company's debts landing on your shoulders would do. Also it should be noted that HMRC now rank ahead of floating charge holders in any liquidation since December 2020.  Consequently, this may well mean that lenders that you have personally guaranteed will get less recovery hence exposing you more.All banks will agree a deal to repay the PG over time - provided you work with the bank to reduce their exposure.One great piece of FREE advice - always make sure that ALL tax returns, VAT returns and annual returns have been completed and sent in and that other "compliance" issues are dealt with wherever possible. These are important processes and will help protect you as individual directors. It shows that you have been acting properly.  I have heard about directors being able to claim redundancy in liquidation If you have been employed by the company and made payments via PAYE then you will be able to claim redundancy from the government and this is in fact a very simple process (20 minutes to fill out a form and we can help with that) so there is no need really to employ a third party to make a claim.  This process has been open to fraud so the HMRC are cracking down on operators that claim to be able to get money back when there is not enough "paperwork".  It isn't worth the risk.  If it sounds too good to be true then it probably is!You need to learn more about the options. This is clearly a general guide so, if you have any worries at all, please, just call us and we will talk you through the situation free and with expert guidance for your situation. Call one of our advisors or if you prefer, call our IPs (insolvency practitioners) now:Just one CALL will help relieve the stress and get you out of the mess.Why not call 08009700539 or 020 7887 2667 now?We could help you start the liquidation process today.(8.15am till 5.00pm; Out of hours call on 07833 240747, Wayne Harrison (IP)  or Eric Walls (IP) on 07787 278527)Finally, please remember this: NO BUSINESS is worth losing your health, relationships, marriages or your children over. Act properly, take advice, get the problem sorted and then get on with your life. In a little while the stress will go and you can focus on other things that are more important.Want more information on liquidation? Get our new free 2023 Experts Complete Guide to Creditors Voluntary Liquidation that covers Bounce Back LoansWe are experts in liquidation, voluntary liquidation, administration, pre-pack administration, business rescue, corporate rescue and company rescue, we can help solve your problems but only if you talk to us. Call 0800 9700539 for help.or email us your worries at 

Worried Director What Will Happen To Me After Liquidation?

Notice of Intention To Appoint Administrators

A notice of intention to appoint administrators is when the company files a document to the court to outline that it intends to go into administration if a solution cannot be found to its immediate financial problems. It can be used as part of the pre-pack administration process as well as used to restructure a failing business to avoid its liquidation.

Notice of Intention To Appoint Administrators
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What Is A Winding Up Petition By HMRC or Other Creditor

A winding up petition is a legal notice put forward to the court by a creditor. The creditor petitions to the court if they are owed more than £750 and it has not been paid for more than 21 days. The application, in effect, asks the court to liquidate the company as they believe the company is insolvent.

What Is A Winding Up Petition By HMRC or Other Creditor

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