It is an unavoidable fact that liquidating your limited company comes with a significant price tag attached, typically in the region of £5,000. Finding the money to cover these fees could be difficult at the best of times, but when your company is struggling to stay afloat, this could be an impossible challenge. Despite this, if your company is sinking under mounting debts with no chance of recovery, you really do have to take the appropriate action to put an end to the situation without worsening the position of your creditors.
If your company does not have this sort of money to hand, all is not lost; there are alternative ways of funding the liquidation of your business.
Even though your company may not have money sitting around in its bank account, there may be funds tied up in assets the company owns. These assets could include property, vehicles, machinery, or even finished or raw stock. As part of the liquidation process, the appointed insolvency practitioner will take control of these assets and will look to sell them for the highest price possible. The liquidator will typically take their fees from the money raised from this process before distributing the surplus amount among your creditors. This means you will not have to give the insolvency practitioner any money up front as their fees will be taken as part of the liquidation.
As a limited company is classed as its own legal entity, its finances and those of its directors are kept separate. Therefore it may be the case that even though your company is not in a position to cover the liquidation fees, you may be able to do this personally. Obviously this may not be something you wish to do; in fact, you may have already ploughed a significant amount of your savings into the business in an attempt to keep it afloat and are hesitant to give your company any more. However, you need to remember that you have certain duties and responsibilities in your role as company director, and one of those is prioritising and protecting the interests of your creditors once you become aware that your company is insolvent. The very best way of doing this is enlisting the help of an insolvency practitioner in order to have the company closed down and its liabilities dealt with. Failure to do this could see you facing accusations of wrongful trading, something which comes with serious repercussions if you are found to be guilty.
Another way of funding your insolvent company’s liquidation is through director redundancy. Working in the same way as redundancy for employees, director redundancy can be a huge financial lifeline at a time of considerable stress and worry. In many cases, you can actually use your director redundancy to fund the cost of your liquidation, while still having some left over for you to use however you want. This is because while the average cost for a CVL – the name for an insolvent liquidation – is £5,000, this is eclipsed by the £12,000 directors can on average claim in the form of redundancy and other statutory entitlements.
Remember, if your company is experiencing financial worries, and you fear you may be trading while insolvent, you have a legal requirement to sort out the situation. Simply putting it to the back of your mind is not an option; not only will this only serve to exacerbate the issue, but you also run the very real risk of wrongful trading. Therefore you should make it a priority to seek the advice of a licensed insolvency practitioner as a matter of urgency. You will be able to learn more about the options available to you and your company, and also come to an arrangement on how best to pay the costs of liquidation.
If you are concerned about your company and are considering liquidation, talk to the team at Redundancy Claims UK to discover how director redundancy could help you. We will be able to tell you if you qualify and also let you know how much you could expect to receive. Call us today on 0800 063 9261.