If your company has reached the stage where it must be liquidated but there is no money available to repay creditors, or fund the necessary professional fees, you may feel that there’s no way out.
Company dissolution and Members’ Voluntary Liquidation (MVL) aren’t appropriate options because the business needs to be solvent in order to qualify. You could wait until a creditor forces your company into liquidation, but this presents its own problems in the form of close scrutiny of your actions by the Insolvency Service.
So what are the options are you left with? A key factor in any corporate insolvency is placing the interests of creditors first, and you can do this via a Creditors’ Voluntary Liquidation process, or CVL.
Creditors’ Voluntary Liquidation gives you a degree of control over the process. You can initiate the liquidation of your company yourself, and the insolvency practitioner’s investigations are likely to be less invasive as you’ve recognised that creditors’ interests are paramount.
But a CVL offers even more benefits when you’re trying to liquidate a company with no money; this is because you may be able to claim redundancy pay as a director. The average claim for director redundancy is £12,000 – a significant sum that could cover the costs of a CVL, and even leave some over for you.
For small businesses with no assets, the professional fees for Creditors’ Voluntary Liquidation are generally around £4,000-£5,000 plus VAT. Voluntary liquidation costs can increase significantly for larger companies with assets, however.
This is due to the increased complexity and additional work involved in valuing and realising assets, and dealing with employee and contractual issues that often arise in larger organisations.
If you’re a company employee as well as a director, it’s worthwhile making a claim for redundancy pay as this could easily take care of these professional fees.
Redundancy pay is calculated using your age, length of service, and wage. Statutory redundancy rules give you the right to claim on the same basis as your staff members, which means you may also be entitled to receive arrears of wages, unpaid holiday, and notice pay.
If you meet the eligibility requirements, you could receive a sum sufficient to liquidate your company and move on without fear of misconduct allegations. Although waiting for a creditor to force your company into liquidation means you won’t have to pay the liquidator’s fees, you could face serious accusations if you’re in any way to blame for the insolvency. The chances of this are reduced when you opt for a CVL because you’ve placed the interests of your creditors first by initiating the process.
With over 40 years’ experience of insolvency and director redundancy, our expert team at Redundancy Claims can provide the reliable advice you need to make the best decision for you and your company. We’ll let you know if you’re eligible to claim director redundancy, and take you through the entire process from start to finish.