Could You Liquidate a Company for Free?

If as the saying goes; there is no such thing as a free lunch, the meaning certainly stretches to liquidating your company.

Liquidation may not be free, but there are sometimes other alternatives available in which you can pay for the liquidation and keep the cost down.

Could You Liquidate a Company for Free?

Liquidating your assets for free?

If you are unable to pay an insolvency practitioner, the general way they can be paid is by selling the company’s assets. This is generally not just limited to machinery and stock. A well-used business phone number, a well-designed website or popular URL can be of value to the correct person.

how to liquidate company for free

If an insolvency practitioner is happy that this may sell well in an online auction, they may be willing to take a risk on their fees, effectively providing their services for free, in relation to this. They may, however, require you to provide a personal guarantee which may be called up if the assets sell for less than anticipated at which point you may find yourself with a large bill for the balance of their fees.

As a result, this may be unattractive unless there is a buyer already lined up for these assets. More information on how assets are sold in liquidation.

Administrative Dissolution

Another way to wind up a company is via administrative dissolution. Where there are no assets or debts within the Company this is usually the preferred process and is usually straightforward.

To a very limited degree this can be used where there are debts, however, it is generally very high risk. This route can only be followed by first writing to all of the company’s creditors, advising them of the financial situation and inviting them to petition for the winding up of the company.

It is also necessary to inform all stakeholders of the business including, directors, employees, shareholders and any pension scheme.

The risks to this route include:

  • A single objection from any party is sufficient to stop this from happening
  • Any stakeholder can apply for the company to be reinstated
  • You are at risk of being accused of trading whilst insolvent
  • If any assets are disposed of prior to this process taking place you may be held liable for this

Again this is not an attractive route to winding up a company’s affairs and should only be used in the limited circumstance where you are closing down completely. If you intend to set up a new company creditors are almost certain to pursue you further and this could result in having to pay a lot more than the cost of a liquidation or even result in your own personal insolvency.

Redundancy Claim

A much more attractive way of funding a liquidation may if the liquidator is willing to let you pay their fees by way of your redundancy entitlements. The government has a scheme in place to ensure employees of the company are paid and they will then make a subjugated claim in the estate.

As a director of a limited company, in making the decision to form a company you generally intend to get paid and make a living from said company. Therefore, if you have acted as an employee of the company and are owed money, you are also entitled to receive payments for your service where you have not already been paid.

There is more information on claiming redundancy as a director here, however if the insolvency practitioner is happy to take the risk, which they will need details of the facts of your case, this can be a way to cover the liquidation fee and potentially recover some of the earnings you have sacrificed over the last few years as a director.

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