If you need to liquidate your company due to insolvency, there are a number of ways you can pay for the process, which attracts professional fees. Entering voluntary liquidation is highly beneficial when you consider the alternative of forced liquidation by a creditor.
Compulsory liquidation carries significant risk for directors, as when you wait for a creditor to wind up the company you can extend your creditors’ losses. This may make you personally liable for the additional amounts, and you could also face accusations of misconduct that might lead to disqualification.
So how can you pay the professional fees required when you place your company into voluntary liquidation?
The liquidation process involves selling company assets for the benefit of creditors. As the appointed office-holder is a creditor, there may be sufficient funds from the sale to cover their professional fees.
If the sale of assets doesn’t generate sufficient cash to pay the fees in total, you could perhaps take out a loan or other form of personal finance to make up the difference, or even pay all of the fees in this way. Even though your company is insolvent, it’s a separate legal entity financially, so your own credit rating shouldn’t be affected by its decline.
Some insolvency practices offer instalment plans if a company director needs help in paying the liquidation fees. Paying in instalments lowers the impact on your own finances by helping you spread the cost. Alternatively, you may be able to negotiate a cap on the fees so you have some certainty over how much you’ll ultimately pay.
It’s not a widely known fact, but directors of an insolvent company can claim redundancy pay and other statutory entitlements under certain conditions. To be eligible for director redundancy, you’ll need to have:
Redundancy pay could provide a substantial sum with which to pay the liquidation fees, and possibly to also support your personal financial situation. We can help you establish whether or not you’re eligible for director redundancy, and support you in making a claim.
You may have heard that company dissolution is a good method of closing down a company. It’s certainly inexpensive as it only costs £10 on application to Companies House. As the company is insolvent and facing liquidation, however, it’s unlikely that Companies House would grant the application as the process is only designed for companies that can repay their creditors in full.
If your application was rejected, you could face official questions as to why you tried to close the company in this way and avoid repaying your creditors. This might lead to disqualification and even personal liability for some of the company’s debts.
It’s always advisable to seek professional advice if you’re business is in financial distress. Taking the right course of action helps you avoid allegations of misconduct, and ensures you prioritise company creditors as required by the Insolvency Act.
Please get in touch with our partner-led team for more trustworthy guidance on company liquidation. We’re liquidation specialists and can offer you a free, same-day consultation so you can quickly take the action you need.
If you are considering liquidation for your limited company, taking advice from a licensed insolvency practitioner can help you understand your options.
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If you are considering liquidation for your company, taking expert advice at an early stage is crucial. At UK Liquidators, our team of licensed insolvency practitioners are committed to providing limited company directors with the help and advice they need to make an informed decision.
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