For many directors, the stress of insolvency is further compounded by the notion that they will have to find the money for the liquidation from their own pockets. 

This article offers some insight into whether you can liquidate your limited company cheaply and the best methods for doing so.

Liquidating Your Company Cheaply

One thing to point out before we continue is to simple be aware of unlicensed companies that try to sell you a budget liquidation, but will then refer you to a licensed insolvency practitioner to carry out the actual process. Choosing this option means you might pay twice, plus you’re inititally in the hands of someone without the necessary acceditation to give proper advice.

All liquidations must legally be performed by licensed insolvency practitioners, so it’s worth finding a firm you can trust. Given that you’re entrusting them with closing your company during a usually fairly stressful period, it’s worth saying too that the cheapest option might not be the one which serves you best.

How Can Liquidation be Funded?

The first thing to realise is that liquidations can usually be funded from the sale of company assets. This means the insolvency practitioner will then be paid from the proceeds of the asset realisation, after which creditors will be paid in order of priority.

This means that it is entirely possible for a liquidation to occur without it costing the directors anything, in terms of their personal resources.

In the case of a company with minimal or no assets, the good news is that the overall cost is cheaper since complex liquidations take up much more of a liquidator’s time. 

Where there are no assets, the process becomes simpler. The Insolvency practitioners will still need to be paid, however, so this is usually found by directors assuming the company coffers are empty.

Liquidations Can’t Be Funded from Directors Redundancy

Another little known fact is that directors of insolvent companies are often entitled to substantial redundancy payments from HMRC. Depending on the directors length of employment, age, and salary bracket, these sums of money are often enough to cover the cost of a voluntary liquidation entirely.

Despite the fact that the internet is rife with firms suggesting you can use this redundancy money to actually pay for a cheap liquidation, the law does not allows insolvency practitioners to find insolvency procedures in this way.

Nevertheless, the money can be useful during a difficult time. It is best to call us to discuss your eligibility for this and we can then advise the likely returns.

Dissolution is not a ‘Cheap’ Alternative for Insolvent Companies

For business owners with outstanding debts, striking off a company is also not an option.

While certain practitioners endeavour to sell people a ‘cheap liquidation’ and then suggest this course of action, it is worth understanding that any creditor can have a company reinstated even years after it has been struck off the register if is found that there are outstanding debts.

The same goes for pre pack liquidations, whereby you may be assured you can simply close down one company, buy the assets cheaply and then start up again. This area is closely regulated and HMRC will take action at any suggestion of ‘phoenixing.’

Despite how tempting these methods may appear, we always advice looking the situation squarely in the face and liquidating your company in the legally recommended method.