With almost four decades of experience in business, Mike Smith is one of the founders of Company Debt and one of the UK’s most experienced mediators with HMRC.
Having previously owned several of his own successful companies and occupied senior roles as a director within both Legal and General and Sun Alliance during separate periods of his career, Mike founded Company Debt with a genuine desire to help stressed directors in challenging circumstances. He is also an expert in the alternative finance sector.
The bank balance reads zero, creditors ring daily and the insolvency practitioner you contacted has quoted several thousand pounds the company simply cannot pay. It feels like checkmate, yet doing nothing risks wrongful trading and personal liability. The good news is that UK law offers more than one way to close or rescue a cash-strapped business, each with its own costs, duties and levels of personal exposure.
This page explains those options in plain, factual terms for UK companies. It is information only; always take tailored advice from a licensed insolvency practitioner or solicitor before acting.
Why “No Funds for Liquidation” Cannot Mean Doing Nothing
When a company cannot pay its debts as they fall due, or its liabilities exceed its assets, it is insolvent. At that point your legal focus changes. Instead of prioritising shareholders, directors must act in the interests of creditors as a whole. That usually means preserving remaining cash, keeping proper records and seeking professional advice promptly.
Doing nothing because there is “no money for a liquidator” increases risk. The longer a company continues trading once insolvency is clear, the harder it may be to demonstrate that directors took every reasonable step to minimise losses to creditors, as required under the Insolvency Act 1986. Courts, the Insolvency Service and the Official Receiver can all review conduct after insolvency.
Possible consequences of inaction include:
A wrongful trading order requiring a director to contribute personally to company assets.
Director disqualification from acting in the management of companies for a specified period.
Criminal offences where statutory duties are breached.
Investigation costs and professional fees being recovered from available assets before creditors receive payment.
Four Main Routes at a Glance
Four lawful avenues cover most situations where a company has no funds available. Comparing the trade-offs first helps identify which options remain realistic.
Route
Up-front Cost
Who’s in Control
Typical Outcome
Key Risks
Voluntary strike-off
£13 online / £18 paper Companies House fee
Directors until dissolution
Company dissolved if no objection
Creditor objection, criminal offence if notice rules ignored, assets pass to the Crown
Creditors’ voluntary liquidation (CVL)
Director or creditor funded IP fees (varies)
Directors choose liquidator
Orderly closure by liquidator
Personal funding pressure, conduct review
Compulsory liquidation (court)
£2,600 petition deposit plus court fee if you petition; none if creditor petitions
Court and Official Receiver
Court-ordered winding up
Loss of control, formal investigation
Rescue route (CVA, moratorium, administration)
IP fees plus working capital required
Directors or IP depending on process
Business rescue or sale
Failure if funding unavailable
Use this overview as a filter. If personal funds are impossible, a CVL may not be achievable immediately. If retaining control matters more than cost, a funded CVL or rescue may be preferable.
Voluntary Strike-Off – Cheap but Risk-Heavy for Insolvent Companies
Striking a company off the register is inexpensive and can look attractive when there is no cash, but using it while insolvent carries risk. The process is only suitable where legal requirements are strictly met.
Voluntary strike-off (dissolution) is started by filing form DS01 with Companies House. The form must be signed by a majority of directors. The registrar publishes notice in The Gazette and, if no objections are received, the company is dissolved not less than two months later.
Key eligibility requirements include:
The company must not have traded or changed its name in the previous three months.
No ongoing insolvency proceedings or winding-up petition can exist.
A copy of the DS01 must be sent within seven days to all known or likely creditors, including HMRC, banks, landlords and employees. Failure to do so is a criminal offence.
Creditors, including HMRC, can object to strike-off. A valid objection normally suspends the process.
What happens to leftover assets?
On dissolution, any remaining assets transfer to the Crown as bona vacantia. Recovering them later usually requires restoring the company to the register through court application.
Is strike-off legal for my company?
The company has stopped trading for at least three months
No ongoing legal or insolvency action exists
All creditors have been notified
No remaining assets of value remain
If these conditions are not met, liquidation is usually the appropriate route instead.
Creditors’ Voluntary Liquidation When the Company Has No Assets
A CVL allows directors to close an insolvent company in an orderly way, but an insolvency practitioner must still be appointed and paid. If funding cannot be found, control may ultimately pass to the court through compulsory liquidation.
What a CVL Involves
Shareholders pass a special resolution (75% by value) to wind up the company.
Creditors are invited to participate in the decision procedure that confirms the appointment and fee basis.
Funding Routes When the Company Is Asset-less
Directors contributing personal funds.
Director redundancy claims where eligibility exists.
Funding by a creditor expecting recoveries.
Realising modest remaining assets such as stock or book debts.
Pros
Directors choose timing and liquidator.
Structured closure process.
Employees can claim statutory entitlements promptly.
Cons
Up-front funding is normally required.
Conduct and transactions will still be reviewed.
If funding fails, a creditor may petition for winding up.
Compulsory Liquidation – Letting the Court Step In
Where funds are exhausted, compulsory liquidation may occur following a creditor petition or, less commonly, a director-led petition. Once a winding-up order is made, control passes to the Official Receiver.
Once the order is made, the Official Receiver takes control of company assets and records and investigates the circumstances of failure. The case may later be transferred to a private insolvency practitioner.
Compared with a CVL, compulsory liquidation usually means less director control and a more formal investigation process.
Rescue Routes (CVA, Moratorium, Administration) – Are They Realistic with Zero Cash?
Formal rescue procedures normally require funding because the business must continue trading during the process and professional fees must be met.
Company Voluntary Arrangement (CVA): an agreement with creditors to repay debts over time while trading continues. Approval requires at least 75% (by value) of voting creditors.
Moratorium: a short-term breathing space introduced by the Corporate Insolvency and Governance Act 2020, overseen by a licensed monitor who must believe rescue is likely.
Administration: an insolvency practitioner takes control to rescue the company, achieve a better result for creditors or realise assets in an orderly way.
Without working capital or new investment, these options are rarely viable.
Consequences of Inaction or Trading On
Continuing to trade once insolvency is clear increases risk. Creditors may take enforcement action, including statutory demands or winding-up petitions, and once a winding-up order is made the Official Receiver assumes control immediately.
Directors should be aware of:
Wrongful trading liability where losses increase after insolvency becomes unavoidable.
Personal guarantees being called by lenders.
Possible disqualification proceedings where misconduct is identified.
Early advice usually provides more options than waiting for creditor action.
Employees and Director Redundancy Claims – A Possible Funding Source
Where a company enters liquidation or administration, employees, including qualifying directors, may claim certain statutory payments from the National Insurance Fund through the Redundancy Payments Service.
Claims may include:
Statutory redundancy pay
Unpaid wages (subject to statutory weekly limits)
Holiday pay
Statutory notice pay
Certain unpaid pension contributions
Director Eligibility
A director may qualify if they were genuinely working under a contract of employment and paid through PAYE. There is no fixed minimum hours requirement; eligibility depends on the overall employment relationship.
Timing and Funding Mechanics
Payments are made directly to individuals after insolvency is confirmed. Some insolvency practitioners may allow directors to fund liquidation costs temporarily using personal funds with the intention of reimbursing themselves once claims are paid, but the payment itself is not made to the company.
Quick Decision Checklist – Which Route Fits Your Situation?
Has the company traded or changed its name in the last three months?
Yes: strike-off is unavailable.
No: continue.
Are there external creditors?
Yes: strike-off is likely to be challenged.
No: strike-off may be appropriate.
Is funding available for an insolvency practitioner?
Yes: a CVL may provide more control.
No: compulsory liquidation may follow creditor action.
Is there realistic funding for rescue?
Yes: explore CVA, moratorium or administration.
No: focus on orderly closure and record keeping.
FAQs
1) Can I pay liquidation fees personally and reclaim them later?
Yes. A director may lend money to the company to fund liquidation costs. Repayment depends on asset realisations and is normally treated as an unsecured claim, meaning recovery is not guaranteed.
2) Is strike-off safe if the company only owes money to me?
Potentially, but only if the company is genuinely solvent and no other liabilities exist. All known or potential creditors must still be notified.
3) Will HMRC write off debt if the company is dissolved?
No. HMRC commonly objects to strike-off where tax is owed and can apply to restore a dissolved company in order to pursue liabilities.
4) What happens to a Bounce Back Loan if the company is struck off?
The debt remains with the company. Lenders may object to dissolution or seek restoration. Bounce Back Loans are not personally guaranteed unless misuse or misconduct is established.
5) Can I start another company after liquidation?
Generally yes, unless you are disqualified. Restrictions apply to reusing a similar company name following liquidation under Insolvency Act 1986 section 216.
6) Do I have to tell suppliers before applying for strike-off?
Yes. A copy of the DS01 must be sent within seven days to all known or likely creditors, including suppliers, HMRC and employees.
7) How long does compulsory liquidation take?
Timescales vary depending on court listings and creditor action. Once a winding-up order is made, the Official Receiver becomes liquidator immediately.
8) Can directors claim redundancy in compulsory liquidation?
Potentially, if they qualify as employees under employment law tests and were paid through PAYE.
9) Will the Official Receiver investigate a no-asset company?
Yes. An initial investigation takes place in every compulsory liquidation. Further investigation depends on the information available and any signs of misconduct.
10) What is the penalty for wrongful trading?
The court can order directors to contribute personally to company assets where losses increased after there was no reasonable prospect of avoiding insolvency. Disqualification proceedings may also follow.
11) Do I need a solicitor to defend a winding-up petition?
Legal representation is not compulsory, but professional advice can help assess options such as dispute, adjournment or rescue proposals.
12) How is a director’s loan treated in liquidation?
If the company owes the director money, it is usually an unsecured claim. If the director owes the company money, the liquidator is required to pursue recovery for creditors.
13) Are strike-off rules different in Scotland or Northern Ireland?
The legal framework derives from the Companies Act 2006 and is broadly the same across the UK, although Gazette publication and bona vacantia administration differ.
14) Can a moratorium pause creditor action if I have no cash?
A moratorium requires a licensed monitor to confirm that rescue is likely and that ongoing obligations can be met. Without funding, it is unlikely to be available.
15) What records must I keep once the company stops trading?
Companies must keep accounting records and supporting documents for the required statutory periods and make them available to the liquidator or Official Receiver if requested.
One Clear Next Step
If you are unsure which route best protects you, your staff and your creditors, speak to a licensed insolvency practitioner or contact the Insolvency Service for guidance. Early advice helps avoid accidental breaches of director duties and keeps more options available while decisions are still in your control.
