Can You Liquidate a Company For Free?

Is it possible to liquidate my company for free?

Liquidating a company involves selling its assets and repaying creditors from the proceeds. When a formal liquidation process is used it requires the involvement of a licensed insolvency practitioner (IP), and as such, attracts professional fees.

Theoretically, it is possible to liquidate a company for free under certain circumstances but it’s not always a straightforward situation. You may have to consider using some of your personal funds to pay these fees, but there are a couple of other options.

Liquidating a company for free

The first involves claiming director redundancy, but this is only applicable to insolvent companies entering Creditors’ Voluntary Liquidation. It’s a common belief that only members of staff can claim redundancy, but if you’re an employee of an insolvent company and you enter into a Creditors’ Voluntary Liquidation (CVL), you may be eligible as a director.

Paying for insolvent liquidation with statutory redundancy pay

If you and other directors worked as employees of the company in addition to being directors, you could potentially make a successful claim for director redundancy if you:

• Worked for the company for a minimum of two years continuously
• Worked for at least 16 hours per week
• Received a salary through the PAYE scheme
• Worked under a contract of employment, whether written, oral, or implied
• Fulfilled a role that was more than just advisory

It would be easier to prove your status as employee if you worked under a written employment contract, but successful redundancy claims have also been made by directors with implied contracts or oral contracts of employment.

It’s highly advisable to seek professional insolvency help early on if you’re considering liquidating your company, or you feel that the business could slide into insolvency in the near future.

Paying for company liquidation from the sale of assets

The funds generated from the sale of company assets is used to repay creditors in the statutory order, so you may be able to liquidate your company for free depending on the number and value of those assets.

If the company is solvent and undergoing a Members’ Voluntary Liquidation (MVL), any remaining proceeds will be distributed to shareholders when the liquidator’s fee and all creditors have been paid.

The company may be insolvent, however, and in this case you might be able to liquidate the company for free via a CVL, by using a combination of the sale of assets and the use of director redundancy pay.

If other directors also make a successful claim, it would boost the funds available to pay for the liquidation so you may not have to use your personal funds to cover the costs. It would also mean that you could avoid compulsory liquidation and minimise your risk of wrongful trading.

Liquidating a company for free - company dissolution

You may have heard that company dissolution is a cheap way to liquidate a company as there are no professional fees involved, but this process is only relevant to solvent businesses.

If your business is insolvent, when you notify creditors of your intention to dissolve the company, they’re highly likely to make a formal objection if you still owe them money. Even if your company can repay its debts in full, there’s always the chance that you might fail to inform a creditor, and then risk the company being reinstated at a later date.

UK Liquidators are a highly experienced team of licensed insolvency practitioners, and can provide further advice and practical support if you’re thinking about liquidating your company. Please contact one of the team to arrange a free same-day consultation – we operate from a wide network of offices throughout the country.