By If your company has little or no money left, it might be time to consider liquidating the business. This will stop creditors chasing you for payments, stop HMRC and Companies House from contacting you about tax and PAYE returns, and allow employees to claim their outstanding wages. However, liquidation can be expensive and unless you are able to find funding to cover the costs of the process, you could end up personally liable for some or all the debts.
One option is to use the company’s assets to pay for the liquidator’s fees, a process called self-funding. This involves using the proceeds from the sale of any assets (such as cash at the bank, invoices awaiting payment, stock or vehicles) to pay for the input of a licensed insolvency practitioner. If you are able to do this, you will not need to make any personal contributions to the cost of liquidation and may even have money leftover to spend as you see fit.
Another way to fund a liquidation low-cost liquidation options is through statutory redundancy payments. This is often the most cost-effective way to go into liquidation and can help you keep as much of your own money as possible. However, you should be aware that the majority of the proceeds from redundancy will be paid to creditors as a priority so you might not get as much as you think when it comes to the money you keep.
You might be able to find other sources of funding for your liquidation, such as loan guarantees or other third-party finance arrangements. You might also be able to find the funds you need through asset realisation or by selling shares in the company to cover the cost of the liquidation. Alternatively, you might be able to negotiate a reduced fee from the liquidator or to use referral work that they have been given in order to reduce the amount of money they charge.
If you are unable to find the funds to fund your liquidation, the alternative is to allow your creditors to force you into compulsory liquidation. This is not the best option, as it can take a long time and will likely result in significant personal liability for you as the director.
A further alternative to liquidation is to have your company struck off from the Companies House register, a procedure commonly known as a ‘strike-off’. This is a very low-cost option and can be done for as little as PS8 when you initiate the process through the Companies House website. However, this is not a formal insolvency procedure and will not offer you the same tax advantages as a Creditors’ Voluntary Liquidation or Members’ Voluntary Liquidation. However, it can be an effective solution if you are confident that your company is no longer trading and that there will not be any potential for a future turnaround.
