How Much Does it Cost to Liquidate a Limited Company?

There’s no set cost to liquidate a company, but in most cases, expect to pay between £4,000 and £6,000 plus VAT, depending on the complexity of the situation and the amount of assets involved.

These fees are paid to licensed insolvency practitioners appointed to handle the liquidation process and tend to increase based on the amount of time and work involved.

My complete guide will explain the typical fees for liquidating a company through solvent and insolvent procedures.

What Are the Costs of Company Liquidation?

The cost to liquidate a limited company in the UK is typically £4,000 to £ 6,000 or more for an insolvency practitioner’s fees, plus additional legal, disbursement, and court fees. Company liquidations must be carried out by a licensed insolvency practitioner (IP).

Larger companies with more assets or complex winding-up needs may incur total liquidation costs above £10,000-£15,000 or more in some cases.

The cost of a Members’ Voluntary Liquidation (MVL) – which is used to close solvent companies with assets over £25k – is typically lower than that of a CVL, but again, this will vary depending on the amount of work required.

What Additional Costs are Incurred in Liquidation?

• Insolvency practitioner’s fees: £4,000 to £15,000 or more, depending on the complexity of the liquidation process
• Legal costs: £1,000 to £3,000 for solicitor’s fees for legal guidance and the filing of necessary paperwork
• Disbursement costs: £500 to £2,000 for third-party costs necessary for the liquidation process, such as advertising the liquidation or valuing assets
• Court fees: £280 for a winding-up petition if the liquidation process goes through a court
• VAT: 20% on most of these fees

What do the Liquidation Costs Cover?

Liquidation costs cover the expenses incurred by the liquidator in the process of formally closing a company. These costs can include:

• Liquidator’s fees: Charged on a fixed basis or as a percentage of assets sold.
• Creditors’ meeting costs: Expenses for organising and holding meetings with creditors.
• Statement of Affairs preparation costs: Costs for preparing the document detailing the company’s financial status.
• Dispute settlement costs: Expenses for resolving any outstanding disputes or contracts.
• Debt collection costs: Costs associated with collecting owed money.
• Government authority notification costs: Expenses for notifying HMRC, Companies House, and the Insolvency Service.
• Transaction investigation costs: Costs for investigating pre-liquidation transactions.
• Asset valuation and realisation costs: Expenses for valuing and selling the company’s assets.

» MORE Read our full article on Who Pays the Liquidator’s Fees?

Who Pays the Costs of Liquidation?

In a voluntary insolvent liquidation, the costs of liquidation are typically covered by the company’s assets. Should these assets be inadequate, the directors or shareholders of the company may be required to pay the remaining liquidation costs.

In compulsory liquidation cases, the party initiating the process (by petitioning for the winding up of the indebted company) bears the burden of paying the liquidation fees.

In a Members’ Voluntary Liquidation (MVL), the liquidation costs are taken from the sale of company assets. Once these costs are paid, the remaining funds are distributed to the shareholders.

How are the Liquidation Fees Paid?

Liquidation fees come out of the company’s asset sales or any cash if there’s some left over. This means creditors might get back some of what they’re owed, but usually not all, because the company’s debts typically outstrip its assets.

Creditors are paid in a strict order of priority, beginning with the liquidator fees and costs. After this, secured creditors with a fixed charge, then preferential creditors, secured creditors, unsecured creditors, and shareholders.

The more the liquidation costs, the less money there is to go around for creditors. Therefore, creditors have a direct interest in how much the liquidator charges.

What if my Company Cannot Afford the Costs of the Liquidation?

If your company cannot afford liquidation costs, options include negotiating a payment plan with the liquidator, using company assets, borrowing funds, or using personal funds.

There are a few different ways that liquidation fees can be paid:

• Immediately: The company may have enough cash on hand to pay the liquidation fees immediately.
• Over time: The liquidator may agree to spread out the payments over time.
• Contingency: The liquidator may agree to defer payment of their fees until the company’s assets have been sold and the proceeds distributed to creditors.
• Partial upfront payment: The company may make a partial upfront payment to the liquidator, with the remaining balance due once the company’s assets have been sold.

However, be aware that if the company’s assets are insufficient, directors may risk personal liability for its debts. If these options fail, the liquidator might seek a compulsory winding-up by the court.

Can Directors be Personally Liable for Liquidation Costs?

Directors are not typically personally liable for liquidation costs. These costs are usually covered by the company’s assets. However, if there are no company assets or cash available, directors may need to pay from their personal funds.

Additionally, directors can be personally liable if they have given personal guarantees for company debts or if found guilty of wrongful or fraudulent trading, potentially making them responsible for the company’s debts, including liquidation costs.

Thinking of Liquidating Your Company?

Considering liquidation for your company? At Company Debt, we’re here to guide you through every step with expert advice and support.

Our licensed insolvency practitioners offer tailored solutions via clear, practical advice.

Contact us today for a free, no-obligation consultation and take the first step to learning more about your options.

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