Options available if you are unable to pay insolvency practitioner
Liquidation refers to the formal process of winding up a company, selling company assets and using those realisations to repay your creditor debts.
For companies that are seeking insolvency services due to a lack of cash flow, to continue as a business, opting for voluntary liquidation may be more suitable. While voluntary liquidation – such as creditors voluntary liquidation (CVL) – may, initially, be more expensive, it can prove less costly in the long-term. For instance, the directors retain more control with a CVL than that of compulsory liquidation and can make their own choice of liquidator (subject to the creditor’s approval). Waiting for your company to be placed into compulsory liquidation can be a risky option. Doing so increases the chances of trading while insolvent. If you do continue to trade while insolvent, you may be held personally liable for any losses.
Strike off your company
A company strike off is a very cost-effective method of closing your business. However, it’s important to note that this procedure is not available for companies with more liabilities than assets, have a winding up petition against them or an arrangement with their creditors – such as a CVA.
A company, without assets, can opt to remove their business from Companies House. You will have to file a DS01 form to remove your solvent business from the register. If your company does have any debts, we suggest seeking immediate insolvency advice. You cannot complete the voluntary process without first repaying your creditors.
For those companies that have met the criteria, a company strike off fee of £10 is payable to Companies House. This cheque must not be sent from the business account, as you could be classed as still trading. Generally, the company strike off procedure takes three months, assuming there are no problems. However, you can read more here.
Be aware that, if your company has substantial levels of debt, the creditors are likely to object to a company dissolution. If this is the case, you have little option but to enter a formal insolvency procedure. It is also possible for creditors to reinstate a company, even after the dissolution was approved.
It is expected that the Insolvency Service will work with HMRC to aggressively pursue directors who have allowed their company to be dissolved. This is especially the case when they should have been aware of outstanding debts. New legislation means that directors who dissolve companies with debts can be subject to directors disqualification and personal fines and liability.
If you are considering dissolution, you can contact our business rescue experts for a free dissolution review before proceeding.
Personally raise the funds
When it comes to paying insolvency practitioner fees, it is not uncommon that directors attempt to raise the funds via the sale of their personal assets. There are a number of common methods for raising liquidation fees. You could downgrade to a smaller car, look into credit cards or even personal loans. It’s also important to note that the liquidation of a registered company will not affect your credit rating, and the ability to gain credit. However, the same cannot be said for sole traders, who will become personally liable for the company’s debt. You can read more on the key differences between limited companies and sole traders here.
Before raising the funds personally and, possibly, creating more problems – seek insolvency advice and discuss the relevant insolvency services available for your company. Many insolvency practitioners will, initially, offer free advice as to the best solution for your business. Similarly, obtain insolvency advice via accountants or even industry peers who have faced similar troubles.
As a director of a limited company, you may be entitled to redundancy pay should your company need to be liquidated, and your employment terminated. In the same way that employees of insolvent companies are able to claim for any unpaid employment entitlements to the National Insurance Fund, via the Redundancy Payments Service, when the company enters liquidation, directors are also able to make a claim for the following where owed:
- Statutory redundancy pay
- Loss of statutory notice
- Unpaid wages (up to a maximum of 8 weeks)
- Outstanding holidays (up to a maximum of 6 weeks)
Many directors are not aware that such payments may be available. Thus, they believe there is little help with regards to insolvency practitioner fees. However, the above is relevant for a large proportion of company directors who are legally both directors and employees of the company. To be both an employee of the company as well as company director, you will need to have been:
- Working a minimum of 16 hours per week for the company
- Entitled to remuneration for your services, paid at least in part through the company PAYE
- Working under a contract of employment, whether that is written, verbal or implied
- For redundancy payments, working for the company for a minimum of 2 years
If the conditions above apply to you, this is something that you should investigate further. The payment you receive could help with the insolvency practitioner fees and overall liquidation fees.
If you suspect that your company is heading into financial difficulty, we do advise you seek immediate insolvency advice at the first signs of trouble. Legally, there are strict prohibitions against trading whilst insolvent, if you are later found to have been wrongfully trading. If your business is struggling, it’s important to know and fully understand what risks you may be taking if you continue to trade. For example, whether your actions may leave you personally liable if the company is subsequently forced to liquidate. Under the Insolvency Act, there can be severe consequences if you are found to have been wrongfully trading. You could find yourself personally liable for the company’s debts and banned from being a company director in the future.
Our business rescue experts can provide confidential insolvency advice as to the best option for your company. If you are wondering how much liquidation might cost, use the voluntary liquidation calculator below to obtain a free, initial estimate.
Voluntary Liquidation Quote
How much will it cost to liquidate your business?
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Liquidation is likely to crystallise any outstanding personal guarantees, so you will need to consider carefully how to deal with these prior to liquidating. There are options available that we are happy to discuss, but it is important to understand the potential effects of the guarantees prior to liquidating.
We can organise attendance at your premises to assist with staff redundancies. There is an added charge of £350 for this (already included in your quote). We find that it can really help staff move their claims forwards, and understand the procedure better. Where possible, we work with the local Job Centre so that exiting staff are aware of training opportunities and the most efficient ways of making benefit claims.
Buying assets from the liquidator
Please contact our office or book an appointment if you want to buy assets back from the liquidator. Once we have details of your assets, we can organise independent valuers to review (either on paper or by site visit, depending on the asset types), and we can then agree a fair figure for the purchase.
It may be possible to pay for the assets over a period of time, though it is likely that security would be required.