How much to Voluntary Liquidate
How much to Voluntary Liquidate written by John A Waller, Director. March 10th,2022.
Voluntary liquidation is an effective way to close an insolvent business. The costs associated with the liquidation can put directors off, but not doing so will only impact the directors.
The cost of liquidating your company fluctuates.
So. how do I liquidate my company?
- Whether the company is trading or not.
- How many employees;
- How many creditors file a valid proof of debt along with the sum outstanding;
- The company asset value;
- Director and shareholder profile;
- The quality of the financial information available.
How much to voluntarily liquidate start at around £3000 + VAT. for liquidating a single creditor, such as liquidating with an unpaid Bounce Back Loan (BBL). However, having more than one creditor increases the cost to roughly £3,500-4,000 plus VAT. For more complex matters, including companies with landlords, employees, BBLs and supplier debts, we will provide a written quote after meeting with the directors to discuss the company’s options. Contact HBG Advisory to discuss the liquidation of your company. Do not delay, and expect the situation will disappear!
Avoid websites (not licensed insolvency practitioners) quoting fees below £2,000. This is a sprat to catch a mackerel and often ends in tears. The liquidation cost may be lower, but the risk to you personally increases, mainly if you owe the company any money. Additionally, you will probably deal with all creditors, finding it challenging to move on. Liquidation remains a heavily regulated insolvency procedure, and no shortcuts can occur.
How much to Voluntary Liquidate, and what can you expect?
When should I consider voluntary liquidation?
Voluntary liquidation is when a company’s directors choose to close the company down and disband. The process is straightforward:
- Firstly, a licensed insolvency practitioner acts as liquidator of the company;
- The liquidators assume control of the company, as the business has ceased trading.
- The liquidator sells all the assets of the company in liquidation;
- Finally, the liquidator removes the company from the Companies House register.
Two types of voluntary liquidation exist for directors to consider, so it’s essential to understand which one your company may opt for:
If your limited company is solvent, then it may choose a:
- Members’ Voluntary Liquidation (MVL) occurs when the company has sufficient assets to cover its debts. However, directors must sign a declaration of solvency before proceeding to speed up the distribution of funds.
However, should your company be insolvent, it may then choose a:
- Creditors’ voluntary liquidation (CVL) is a popular method for closing insolvent companies. To do so requires 75% of creditors to agree with the liquidation proposal presented at the creditors’ meeting.
Directors must assist liquidators in carrying out the liquidation. They must hand over:
- All company assets;
- records and paperwork, and also
- Attend interviews if needed.
In a creditors’ voluntary liquidation (CVL), directors must understand that the liquidator must act in the interest of creditors. So should the liquidator discover that a director’s conduct was ‘unfit’? The director faces being fined and disqualified, preventing him from acting as a director for up to 15 years.
How much to Voluntary Liquidate, and what is the breakdown of the costs?
The direct cost of liquidation involves appointing a licensed insolvency practitioner to act as a liquidator and:
- Arrange the creditors’ meeting.
- Preparing the statement of affairs and section 98 reports.
Further costs will accrue as the process progresses. As the liquidator remains required to perform various duties during the liquidation, including:
- Providing advice to directors on their duties;
- Making people redundant and processing their claims;
- Collecting debts, including overdrawn director’s loans;
- Dealing with any outstanding contracts, along with legal disputes;
- Compliance with deadlines for paperwork and information of the relevant authorities, including:-
- HM Revenue & Customs;
- Companies House;
- Insolvency Service; and
- Department for Business, Energy, Innovation and Skills.
- Investigating transactions before the liquidation to check for discrepancies and obvious preferences/undervalued transactions;
- Alerting creditors to progress every 12 months and involving them in decisions where necessary;
- Valuing and realising assets of the company;
- Distributing monies to creditors and accounting for them.
How do companies pay for voluntary liquidation?
Proceeds from the sale of the company’s assets usually pay the costs for three areas:
- The cost of voluntary liquidation;
- Money owed to creditors;
- Shareholder debts.
However, the second and third-tier only receive funds after payment of the cost associated with the previous tier. Therefore, it is unlikely that shareholders will receive the total amount owed.
Periodically, the sales of company assets cannot meet the cost of voluntary liquidation. Therefore, directors may be required to pay their fees in advance to the liquidator.
Considering a voluntary liquidation can be overwhelming for directors to consider the cost. However, not to do so when it leaves you with compulsory liquidation. Both provide legal ways to close your business, protecting the company from a worsening position.
Voluntarily liquidating your company can favour directors, keeping them clear from wrongful trading accusations, preventing personal liability, and ensuring payment to all employees that allow directors to move forward.
Compulsory liquidation is when a company is wound up in the courts by a petitioning creditor.
This is when directors have no control over who is appointed liquidator, as the appointment is passed over to the official receiver.
The official receiver is an officer of the UK insolvency service.
As the court appoints the liquidator, the directors do not directly assume the actual cost of the liquidation.