This article explores cost-effective or no-cost methods for closing down a business and distributing its assets.

Can a Company be Liquidated for Free?

The straightforward answer is no; the liquidation process incurs professional costs for the involvement of a licensed insolvency practitioner[1]Trusted Source – R3 – Insolvency Fees.

On the other hand, if there are company assets that can be sold, it is possible to pay the liquidator from what is raised, meaning that the liquidation is effectively free from the perspective of directors.

The costs of liquidation can vary depending on the complexity of the case and the time required to complete the process. Insolvency practitioner fees typically range from £4,000 to £7,000 for a straightforward liquidation, but can be significantly higher for more complex cases.


What is the Cheapest way to Liquidate a Company with No Money?

When a company has no money and needs to be liquidated, it’s important to find the most cost-effective solution. While it’s not possible to liquidate a company for free in the traditional sense, as there will always be some costs associated with the process, there are ways to minimise expenses:

  1. Using company assets to fund creditors’ voluntary liquidation: If the company has sufficient assets to cover the liquidation costs, a creditors’ voluntary liquidation (CVL) can be initiated. In this process, a licensed insolvency practitioner (IP) is appointed as the liquidator. The IP sells the company’s assets and uses the proceeds to cover their fees and the costs of the liquidation[2]Trusted Source – GOV.UK – Fees, Costs and Disbursements in Insolvency Proceedings. If the asset value is sufficient, the company effectively pays for its own liquidation, and there should be no further costs to the directors.
  2. Wait for compulsory liquidation: If the company has no assets and cannot afford to appoint an IP, directors may choose to wait for compulsory liquidation. This occurs when creditors take legal action to force the company into liquidation. While this option may seem cost-free, there are significant downsides. Directors lose control over the timing and process of liquidation. Additionally, the investigations into directors’ conduct are typically more stringent.
  3. Claim for Redundancy Pay: Directors who have been employed by the company and meet the necessary criteria may be eligible for redundancy payments. While these funds cannot be used directly for the liquidation, they can provide financial support for directors during this challenging time. To claim redundancy, directors must have been an employee of the company for at least two years, worked a minimum of 16 hours per week, and earned above a certain threshold. Redundancy payments can help alleviate some of the financial strain directors face during the liquidation process.

When a company has no assets, and the options mentioned above are not feasible, directors may have to self-fund the liquidation process. This involves personally paying for the costs of appointing an insolvency practitioner (IP) and the associated liquidation expenses.

It is always advisable to seek professional advice from an insolvency practitioner such as ourselves before making any decisions.

What about Solvent Liquidation?

If your company is solvent and has retained assets of more than £25,000, a Members’ Voluntary Liquidation (MVL) could be a cost-effective way to close down the business and distribute the remaining assets to shareholders.

One of the main advantages of an MVL is that it allows shareholders to benefit from Business Asset Disposal Relief (BADR)[3]Trusted Source – GOV.UK – Business Asset Disposal Relief, previously known as Entrepreneurs’ Relief. BADR can significantly reduce the tax payable on the distribution of assets.

Under BADR, qualifying shareholders may be subject to a reduced Capital Gains Tax rate of 10% on the first £1 million of eligible gains (lifetime limit). This means that liquidation profits up to this threshold will be taxed at a much lower rate compared to the standard Capital Gains Tax rates.

To qualify for BADR, shareholders must meet certain criteria, such as holding at least 5% of the company’s shares and being an employee or director of the company for at least two years before the liquidation.

“Can You Liquidate a Company for Free via Dissolution?”

While the internet is awash with advice that suggests you can liquidate an insolvent company for free by simply dissolving it, this is misinformation, and you should do your due diligence carefully.

You cannot liquidate for free since all liquidations must be carried out by licensed insolvency practitioners who charge for their services.

Rather, where the company has no assets, directors may have to find the funds themselves.

Don’t be tempted by internet firms which suggest you can either strike off with debts or use redundancy payments directly.

HMRC has always made it clear that dissolving a company with debt is something they do not allow, and the recent spate of bounce back loan defaults has prompted them to tighten up the law even further in this area. A new bill gives HMRC powers to investigate rogue directors who abuse the dissolution process.

Equally, insolvency practitioners’ are specifically not allowed to use redundancy payments. Be cautious about working with anyone who would suggest otherwise, and certainly don’t agree to any deal which gives a percentage of your redundancy fee to the liquidators themselves. Clearly, there is a conflict of interest for an insolvency practitioner to put in a redundancy claim, which will be used to cover their own fees.

Here at Company Debt, we advocate absolute fee transparency at all times. We apply for directors’ redundancy on our clients’ behalf at cost only.

Tailored Advice is a Click Away

When considering liquidation options, it’s crucial to consult with a licensed insolvency practitioner who can assess your company’s unique situation and provide tailored advice.

An experienced practitioner can help you understand the full range of options available, estimate the costs involved, and guide you through the process to ensure compliance with legal requirements.

If you need help understanding the best way forward for your company, use the live chat during working hours or call us on 0800 074 6757. We’ve helped 1000’s of directors navigate difficult financial circumstances.

FAQs on Cheap Methods of Liquidation

You can’t avoid liquidation costs entirely, although the directors won’t have any personal costs if there are sufficient company assets. The purpose of liquidation is to sell assets and distribute the proceeds to creditors, so some fees and expenses are inevitable.

Since the law requires the involvement of a licensed Insolvency Practitioner (IP), DIY liquidation isn’t an option. Directors must collaborate with a qualified IP to ensure the correct process.

If a company lacks assets to cover liquidation costs, directors can explore options such as personal financing or payment plans, but seeking professional advice is crucial to determine the best solution. In rare cases, directors sometimes have to take personal bankruptcy if there is a substantial deficit.

Yes, the liquidator can negotiate with creditors to reach agreements on payment terms or settlements that may help reduce overall liquidation expenses.


The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.

You can learn more about our standards for producing accurate, unbiased content in our editorial policy here.

  1. Trusted Source – R3 – Insolvency Fees
  2. Trusted Source – GOV.UK – Fees, Costs and Disbursements in Insolvency Proceedings
  3. Trusted Source – GOV.UK – Business Asset Disposal Relief