How High Is The Liquidation Cost?
If you want to close a company and how much does a Liquidation cost, it will vary from case to case and from Insolvency Practitioner to Insolvency Practitioner.
A typical UK Liquidation will cost anything from around £1,000 to £7,500 to place a company into Liquidation.
Whilst all cases are different, one of the cheapest ways to Liquidate a company can be to place it into voluntary winding up; otherwise known as Voluntary Liquidation. It does however very much depend on the facts of the case.
Voluntary Liquidation Cost
There are two types of Voluntary Liquidation. In the case of a solvent company, there is Members Voluntary Liquidation and in the case of an insolvent company, there is Creditors Voluntary Liquidation.
Members Voluntary Liquidation Cost
Depending upon complexity you can expect a Members Voluntary Liquidation (“MVL”) to start at around £1,000 for the Liquidator‘s fees. Such a Liquidation at the lowest cost will often be a simple distribution of the company’s cash to its shareholders.
Creditors Voluntary Liquidation Cost
Depending upon complexity you can expect a Creditors Voluntary Liquidation (“CVL”) to start at around £1,500 for the Liquidator’s fees to place the company into Liquidation.
More Complicated UK Voluntary Liquidations
Upon the company going into Liquidation the Liquidator’s fees will typically also arise for the post Liquidation period, depending on the assets realised in the case.
More complicated cases, involving a wider range of assets and or legal or tax issues can see the Liquidation cost rise considerably as a more demanding case will be all the more time intensive with the corresponding complexities arising as well.
Voluntary Liquidation Disbursements
There will be disbursements that have to be paid in addition to the UK Liquidator’s fees. These disbursements will be added to the basic Liquidation cost.
Such disbursements will be for example the Insolvency Practitioner’s Bond and this will vary depending on the nature and extent of the company assets that need to be bonded as required by law.
In addition, there will be the Statutory Advertising that typically costs in the order of £100 plus VAT for each advert required. Such advertising can be for the notice of the Liquidator’s appointment or for the company Resolutions in which it was placed into Liquidation. Most notices that are advertised are done as a mandatory statutory requirement.
If you are considering Liquidating your company and want to know about these Liquidation costs then bear in mind that there can be other disbursements that can arise depending upon the nature of the case.
How Is A Liquidation Paid For When There Are Assets?
The answer to the question of how much does a Liquidation cost and how is the Liquidation cost paid for when there are assets is from the assets of the company. It is perfectly proper for the UK Liquidator’s fees to be paid by the company itself.
If a Limited company has sufficient assets to pay for a Liquidation then the Insolvency Practitioner who has been appointed as the Liquidator will realise the company’s assets, pays the costs of agents used to sell such assets and then use the proceeds of sale left over to pay for the other costs and expenses of the Liquidation.
How Is A Liquidation Paid For When There Are No Assets?
It is to be expected that a company that needs to go into Liquidation will often have no assets because trading losses and prior sale of the assets will often have depleted the company of all of its property. This then leads to the more challenging and less obvious answer to the question of how the voluntary winding up is paid for when there are no or insufficient assets?
If the company to be placed into Liquidation has insufficient assets to pay for all the Liquidation costs and expenses then there are a number of options available.
The Directors Personally Pay The Liquidation Costs
A responsible step for the Directors to take is to plug any gap between the level of the company’s remaining assets and the Liquidation cost. Creditors will have suffered losses and as a result, they deserve an orderly voluntary winding up of the company’s affairs. Liquidation is the route to resolve that position to enable creditors to have the best chance of getting a dividend as quickly as possible.
If a Liquidation process is started quickly it will likely limit the future costs and thereby preserve any of the remaining assets that otherwise might get eaten up in other expenses such as preparing annual accounts and corporation tax returns. Once a Liquidation is required it is generally better if it is undertaken as soon as possible.
If the Directors pay for a voluntary winding up then they will be able to conceivably claim as a creditor and recover some of their outlay to pay for the Liquidation costs if any recovery were to arise. This might be unlikely but it can and does happen.
Even if the Directors consider it unlikely they are unable to pay for the UK Liquidator’s fees there are options available that you can talk to us about. You might however generally find that a Liquidation costs far less than you envisage. Shop around and you might find a wide range of quotations for a Liquidation.
Making A Claim For Redundancy
If as a Director of a Limited company you have been employed by the company on its payroll, then you will be able to make a claim for redundancy provided you have been employed for more than two years and you are owed money in accordance with the terms of your employment with the company.
This may enable you to claim sufficient sums to enable you as a Director to pay the Liquidation cost.
This is frequently marketed as a route to enable a Director to pay the UK Liquidator. However, the problem with this is that it is not guaranteed and there are circumstances in which a Director might not be aware that a claim to the Redundancy Payments Service can be rejected, such as when there is a Phoenix company involved that has taken over the employees.
Creditors: How The Liquidation Cost Can Be Paid
There are other alternatives as to how the Liquidation cost can be paid for. An example would be that a creditor issues a Winding Up Petition and forces the company into Compulsory Liquidation. The effect of that is that the Directors will then have to attend on the Official Receiver and be subject to an investigation by the Insolvency Service instead of by a Voluntary Liquidator. The cost of the Liquidation process then falls on the Insolvency Service in the first instance which is an executive government agency.
How Is A Liquidator Paid?
A Liquidator is paid subject to the approval of creditors. Without such approval either the Liquidator has no entitlement to a fee or he or she has to apply to Court for their fees to be approved.
Typically a Liquidator can be paid in a number of ways:
- on the basis of their time spent by themselves and their staff
- fixed fee basis
- percentage of asset realisations
The remuneration of a Liquidator is subject to strict and rigorous regulatory scrutiny. You can review those rules in Statement Of Insolvency Practice Number 9.
