John A Waller
Reviewed April 24th, 2021
I can’t afford to liquidate my company.
I can’t afford to liquidate my company. So how may I use a Licensed Insolvency Practitioner? In order that they may assist your company pre-insolvency, and then be appointed as Liquidator of a company, therefore, has an associated cost.
To ensure the fees remain paid for the liquidation. The sale of company assets covers typically that. However, in the event the company has no realisable assets, then what happens then?
Options if I can’t afford to liquidate my company?
Liquidation, how then to rectify, the position has three ways forward:
- Directors pay the fee, or
- Apply to strike the company off using form S1003 per the 2006 Companies Act;
- Use of directors redundancy claim (subject to conditions).see below
Utilising using S1003 strike-off usually remains used when a company has assets deemed to have no or little value once sold. Often the cost of sale can be greater than the sale value.
It remains an application to Companies House to have the company name struck from the Register.
There are, of course, strict rules which require adherence to the Companies Act. However, if you fail to abide by these rules, then you may result in liabilities of the company shifting to the directors personally.
Director’s redundancy to assist in paying for the liquidation
Directors of limited companies may then therefore qualify for redundancy pay when your limited company is fighting to survive, even though liquidation is possible.
Directors may use redundancy payouts to finance liquidations when they have little money, therefore avoiding compulsory liquidation.
Many directors remain in the dark regarding what they may claim when their company either struggles. Little if no help exists. Once in liquidation, support may be possible. Statutory entitlements remain available once the company enters liquidation concerning;
- Unpaid wages;
- Notice pay;
- Holiday pay and unpaid wages.
Specific criteria remain for company directors to remain eligible to claim redundancy as a director. You must:
- Worked for the company 16 hours or more a week;
- Been employed by the company for a minimum of two years;
- Have outstanding monies owed by the company for redundancy;
- Formally have the status of:
- Employed position by the company;
- A director
- Paid through the PAYE scheme for work done monthly or weekly.
Directors remain able to claim redundancy then through the appointed liquidator or the insolvency service.
Who pays the liquidator fees?
Under UK company law, a limited company remains separate from an individual and retains a separate legal entity. As such, the company has the liability of the costs of liquidation.
However, when an insolvent limited company, usually the company’s cash flow has gone. Liquidity is the primary reason often for entering liquidation.
Therefore, the company cannot pay the costs from the company, as there is no:
- Cash at the bank;
- Balances due by factors;
- Company assets;
- Debtors of the company.
Then directors of the company are liable for paying liquidation costs. Therefore, it is essential to realise the situation and help collect debts and invoicing of completed work.
The realisation of company assets to fund the fees
Once the company is in liquidation, the liquidator instructs third-party valuers to realise the company’s assets. Then, the monies raised then fund the liquidation. The balance is then distributed to the company’s creditors, taking into effect changes to HMRC status with effect December 1st 2020.
Often used to assist with liquidation funding, not requiring directors to fund post liquidation costs.
Compulsory Liquidation when I can’t afford to liquidate my company
If you remain unable to afford a liquidation, the compulsory liquidation remains an option.
For further detail, please read ‘Compulsory Liquidation & Winding up petition’.
Many directors prefer to appoint their choice of liquidator referred to as Creditors Voluntary Liquidation.
Please read ‘Creditors Voluntary Liquidation benefits and disadvantages‘ and ‘How do I liquidate my company‘.
HBG Advisory support
HBG Advisory support many UK companies dealing with Companies House. Company creditors often appreciate having licensed Insolvency Practitioners identified during this process, offering some form of legal certainty.
So, directors, subject to no fraud or wrongful trading being evident, remain clear of any personal liability.
HBG Advisory offer FIXED PRICES GUARANTEED for any work we carry out on your behalf.
Please contact HBG Advisory for further help without any cost or commitment on 0800 612 5448 or visit VIRTUAL. For a secure FREE, private confidential chat.
Check out The Team at HBG Advisory.