What to Do When You Cannot Afford to Liquidate Your Company
When your business is insolvent and creditors are closing in, a formal liquidation remains the only responsible course of action. However, it can feel impossible if you lack the funds to meet a conventional liquidation quote.
Rest assured that many directors in the UK face the same challenge.
Why You Cannot Simply Close the Doors
If your company cannot pay its debts as they become due, you must act in the best interests of creditors. Shutting up shop without proper procedures risks personal liability, potential disqualification as a director and claims of wrongful trading. A formal process, overseen by a licensed insolvency practitioner, is the correct legal route even when funds are scarce.
Why Liquidation Still Carries a Cost
Liquidation is a regulated procedure requiring a licensed insolvency practitioner to:
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Deal with creditor claims and conduct investigations into director conduct
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Manage employee redundancies and statutory filings
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Report on the company’s affairs and distribute any remaining assets
Generally, their fees are drawn from company assets. If no assets remain, directors may be asked to contribute to those fees personally.
Practical Options for Low-Cost Liquidation
If a standard Creditors’ Voluntary Liquidation (CVL) quotation exceeds your means, consider these alternatives:
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Specialist Low-Cost Providers
Some firms offer streamlined CVLs for small companies with minimal assets. Always check that they are fully licenced practitioners rather than brokers or lead generators. -
Use Redundancy Entitlements
Directors on the payroll may claim redundancy pay, holiday pay and unpaid wages through the Redundancy Payments Service (RPS). These funds can sometimes cover liquidation fees when arranged via your insolvency practitioner. -
Payment by Instalments
Many practitioners will agree a staged payment plan if they see you are committed to a proper winding-up. -
Realise Overlooked Assets
Review any equipment, intellectual property, websites or customer lists you may have overlooked. A transparent sale, even to a director or third party, can generate funds to meet practitioner fees, provided you obtain proper valuations and record the transaction.
Risks of Inaction
Delaying liquidation exposes you to greater risk:
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Creditors may present a compulsory winding-up petition, which can be more expensive and reduce your control
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You may face director disqualification for failing to meet statutory duties
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Personal liability for debts may arise if wrongful trading is established
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HMRC may take enforcement action for unpaid VAT or PAYE
Doing nothing simply increases legal exposure and stress.
Get Professional Advice Without Breaking the Bank
Cost-effective, professional liquidation services are available to help directors meet their duties without crippling expense. A short, confidential discussion with a licenced insolvency practitioner will clarify your options and point you towards the best solution.