What Happens if I Can’t Afford to Liquidate My Insolvent Company?

Reviewed by

Christopher Andersen

Reviewed by Christopher Andersen

Chris is an Insolvency Practitioner regulated by the ICAEW since 2014,. He is experienced in contentious insolvency with excellent analytical skills and strong knowledge of both general and technical insolvency matters.

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15th April 2024

When a company is insolvent and cannot afford liquidation costs, it creates a challenging situation for directors.

Should you find yourself in this predicament, lacking the financial means to liquidate, it is important to know that help is available. We encourage you to get in touch with the team at Company Debt today to discover how we can help you.

How to Liquidate a Company with No Money

For directors facing the necessity of liquidating their company due to insurmountable debt, the primary concern often revolves around the financial implications of the liquidation process itself. The cost of liquidation can seem like an additional burden at an already stressful time.

However, there are specific measures and alternatives that can help mitigate these concerns.

Installment Plan with Liquidator

One viable option is to arrange an instalment plan with a liquidator. This approach involves negotiating a payment plan that spreads the liquidation costs over time.

By reaching an agreement on a tailored plan, you can make the process financially feasible. This option requires transparent communication with a chosen insolvency practitioner and a clear understanding of the terms of repayment.

Directors’ Redundancy Pay

Directors of insolvent companies often don’t realise they could qualify for redundancy pay, similar to their employees.

This entitlement is based on several factors, including years of service and the salary drawn from the company. Accessing director’s redundancy pay can provide a financial lifeline for directors during this period.

Consulting with an insolvency expert such as ourselves can help you navigate this process and determine your eligibility. It’s important for directors to understand that while redundancy payments can provide financial relief during the period of unemployment following the company’s closure, these funds aren’t meant to be directly allocated towards the costs of the liquidation process itself.

Using Personal Funds for Liquidation

In situations where the company’s assets are inadequate to cover the costs of liquidation, directors might have to consider using personal funds.

Before committing personal money, it’s essential to fully understand the extent of the company’s debts and the likely costs of the liquidation process.

Using personal funds is a last resort and should be undertaken with a clear understanding of the potential consequences for both the director’s personal financial situation and their legal responsibilities.

If You’re Unable to Afford a Liquidator

It’s important to understand that the sale of company assets can often cover the fees for an insolvency practitioner.

These assets include property, stock, vehicles, and even intellectual property. The sale of these assets is intended to generate funds, part of which can be allocated to pay the practitioner’s fees. In scenarios where company assets are insufficient to cover these costs, directors might need to consider other funding options. These could include personal contributions or negotiating a payment plan with the insolvency practitioner, allowing for a more manageable financial arrangement.

How to Close a Company When There Are No Assets or Funds for a Liquidation

If your company is facing closure without the assets or funds necessary for a liquidation process, it’s essential to proactively address the situation before being pushed into compulsory liquidation by creditors. Compulsory liquidation can lead to a range of negative outcomes, such as damaging your professional reputation, potentially exposing you to personal financial risks, and resulting in a loss of control over the liquidation process.

If you’re struggling with the thought of closing your company because you can’t afford the costs, it’s important to talk to someone who can guide you. At Company Debt, we offer clear advice and support from our experienced team all over the UK. Our first meeting with you is completely free and will help you understand what you can do next to close your business in a way that works for you.