The costs of liquidation could be higher than you think
Your business is facing liquidation due to not being able to cover the bills and debts you’ve already got and now you’re being asked to pay an insolvency practitioner to liquidate the company?
We get it. It’s counter intuitive and probably the last thing you want to hear if your business is no longer viable. You’ve invested years invested in the company – physically, emotionally and financially – so letting it go is a grieving process in itself.
Insolvency professionals like ourselves perform an essential service, removing as much stress and pressure as we can although some realities such as insolvency or liquidation have to be faced. We’re the undertakers for limited companies – trying to find the most sympathetic way of shutting down your business, whilst adhering to legislation.
Each insolvency is different and personal to the business owners. The insolvency timeline varies according to each company but usually takes between two and six weeks, not including any post liquidation assistance should it be required.
What we do in the daylight
You’d be surprised how many people never ask us this. Seriously.
When placing a company into liquidation, we will always carry out the following tasks:
- Arrange a meeting of the company shareholders to place the company into liquidation.
- Seek a decision from the company creditors on the conduct of the liquidation.
- Assist the board in the preparation of the statements of affairs and report to creditors on the liquidation of the business.
- Carry out all the necessary filings with Companies House, The Gazette and HMRC, as well as all other creditors.
This is the absolute minimum for any company being placed into liquidation. In reality the tasks to be carried out will also often include:
- Negotiating with creditors and high court enforcement officers to cease any further legal action.
- Negotiating the withdrawal of any winding up petition.
- Assisting with any employees, including directors, who are made redundant and arranging appropriate help and advice for them in finding alternative work, claiming redundancy entitlements and benefits.
- Negotiating with the landlord in order to ensure access to the premises remains available.
- Arranging valuations of the company assets.
- Taking steps to safeguard books debts and company funds for the benefit of creditors.
- Getting legal advisers involved with any ongoing disputes the company is subject to.
The entire process to place a company into Creditors’ Voluntary Liquidation (CVL) must be dealt with under a licenced insolvency practitioner, who must not only have qualified to act, but must also be able to step into any type of business. As a result the liquidation process comes at a cost, and we look at what you should expect from a quote below.
Directors still have some essential duties they must fulfill on behalf of the company but these change as a result of the process:
- They no longer control the company or anything it owns like assets
- They can’t act either for or on behalf of the company
- They must surrender all the company’s assets, records and paperwork to the insolvency practitioner
- Give us any additional information about the company we need
- Agree to be interviewed by us if required
The costs of the first stage of the procedure usually need to be paid for before the company is officially placed into liquidation. If the company can pay for this then it should – although this cost can be passed to directors or shareholders if the company has insufficient or no assets. Where available however, these costs can be paid from any redundancy entitlements due to the instructing director, rather than having to find the funds to pay these upfront.
The costs of the second stage need to be agreed by creditors after the liquidation process has begun and are usually paid from the sale of assets.
So now you know what you’re paying for and why – let’s take a closer look at the costs that insolvency practitioners charge.
We can’t say exactly what our charges will be as each client and their circumstances are different. Our free online quote calculator will give you a good estimate of what your cost will be.
Some procedures require us to be more hands-on so naturally these will cost a little more but we guarantee that you’ll be allocated an experienced case manager to work with you at every stage and answer any questions you’ve got, no matter how small or trivial it seems.
What we can say is that any package that costs £2,000 or under is cheap. Too cheap. It’s attractive based purely on the price but the first thing we’d ask is what isn’t included? When you receive terms of business from firms such as this, you will often find uplifts on the price if:
- They have to deal with employee claims.
- More creditors come up.
- They have to deal with company assets.
- There is a pension scheme to deal with.
- They have to deal with consumer creditors.
- Someone asks them a hard question.
As you would imagine, these uplifts will apply in almost all cases and are often beyond the directors control. As a director you could find you receive a surprise bill later down the line which will be particularly unwelcome, and doesn’t resolve the issue you had in the first place of a lack of funds. They will also require payment upfront, rather than being willing to take this later from redundancy entitlements or otherwise.
Similarly, £7,000 strikes us as literally a bit rich for a small business. If you’re quoted a figure like this and are happy to pay it then you should insist on a solid gold, full service experience to justify it.
Maybe the insolvency practitioner will personally come to your office, clean up, make tea and hire a van to remove assets including lifting the furniture themselves?
That’s the only level of commitment a fee that high would justify. You should also ensure you are working directly with the insolvency practice and not a third party introducer. You will always receive a cheaper quote by going directly to an insolvency practice than paying someone to introduce you to one.
Likewise, if your accountant has introduced you to an insolvency practice and your receive a quote like this, ensure they are not being paid for referring you and shop around. Unfortunately there are a lot of accountants who will introduce you to a specific insolvency practitioner because it is in their interest, not yours.
If Goldilocks teaches us anything, it’s that you get the best value from something that’s just right.
We provide a service and fee to match your requirements not one that costs the earth for the same return or an initial bare bones bargain offer that might end up costing you more in the long run. The quote you receive from us will be the fee you pay, without surprise uplifts.
Use our free online calculator to get your personalised liquidation costs quote