Many directors wonder how they could even fund the process of liquidation. If a company is insolvent, it means its liabilities outweighs its assets, hence the company coffers are empty.

Of course, before you even get to this stage you may wish to take advantage of a free consultation with us to explore whether alternative options might be preferable. We can advise about the merits of a company voluntary arrangement, or perhaps refinancing.

We’ll explore the options for that below.

Who Pays for the Fees of Liquidation?

Here are the options to fund the liquidation process itself:

Sale of Company Assets

Part of the liquidator’s role is to ‘realize’ or sell company assets to pay creditors. If there are funds available these can be used to pay for the RICS accredited Chartered Surveyor, as well as the insolvency practitioners working on the case.

Directors Redundancy Payments Can Pay the Liquidator

Another means of paying the liquidators fees might come from director’s redundancy. Many directors simply don’t realise that it’s not just employees covered by HMRC’s redundancy payment scheme.

You may be eligibile as long as you’re:

  • on the company payroll
  • the company has been incorporated for more than 2 years
  • working a 16 hour weekly minimum
  • owed money by the limited company

Ask us for more details.

Directors Raising the Funds Personally

If there is neither assets to sell, nor the possibility of redundancy payments it may be up to the directors themselves to cover the cost of the liquidation personally.

This only applies if you’re choosing voluntary liquidation, however: you can always wait to be forced into compulsory liquidation. This is a decision with implications, however, so it’s worth speaking with us to fully understand it. Compulsory liquidation will mean you will have far less options available to you, including the fact you can’t choose your own liquidator.

Why Would You Want to Pay for the Liquidation Yourself?

Choosing voluntary liquidation has a number of distinct advantages to waiting to be forced into a compulsory procedure, as we alluded to above.

The basic reasons are as follows:

  • Voluntary liquidation allows you, to some degree, to retain an element of control. You can choose which firm of liquidators you work with and hopefully find someone you feel an empathy with, and whom you feel has your best interests at heart.
  • Voluntary liquidation will likely come with a less rigorous investigation into directorial conduct that a compulsory procedure. Insolvency practitioners are legally bound to investigate the actions of directors for possible wrongful or fraudulent trading.
  • Voluntary Liquidation makes it possible to consider a Pre-Pack, which is where directors buy the assets of the liquidated company and form a new company in order to continue trading.

How Does an Insolvency Practitioner Get Paid?

Insolvency practitioners get paid on either a:

  • fixed fee
  • percentage
  • time cost basis

Whichever of these is decided upon, all fees must be listed transparently and fairly, as per the Statement of Insolvency Practice 9. All of the information related to fees and expenses but must be provided to creditors in a clear fashion, since they are the ones who effectively bear the brunt of the costs.

What if I’ve Got No Money to Pay the Liquidator?

The first thing to realise is that liquidation fees are probably less than you think. What with the possibility of using directors redundancy payments, and money realised from asset sales there is usually enough.

Sometimes directors are asked to pay for the fees themselves, if there are genuinely no other funds available.

If you’re concerned about your situation, and particularly in regard to a lack of funds for any potential liquidation, the best thing is to just speak with us directly. A quick conversation will some illuminate what options live available to you.