To close an insolvent company through a formal liquidation process, typically a Company Voluntary Liquidation (CVL), the costs of appointing a licensed insolvency practitioner must be covered. While liquidation costs are unavoidable, there are several practical ways they can be funded.
Can Company Assets Cover Liquidation Costs?
If the company owns assets such as equipment, stock, vehicles or property, these will usually be realised by the liquidator during the liquidation process.
The funds recovered are distributed in accordance with insolvency law. This includes covering the costs of the liquidation first, followed by payments to creditors where funds allow.
In some cases, asset realisations are enough to cover the full liquidation costs. Where they are not, an additional contribution may be required.
Can Directors Claim Redundancy to Pay for Liquidation?
Many directors are unaware that they may be eligible to claim statutory redundancy if they:
- Were paid under PAYE
- Worked regular hours
- Meet the qualifying criteria
The amount you can claim depends on your age, length of service and salary. While redundancy payments are not guaranteed and may not always cover liquidation fees in full, they can provide valuable financial support when closing an insolvent company.
Can Liquidation Fees Be Paid in Instalments?
In certain circumstances, a licensed insolvency practitioner may agree to a payment arrangement that allows liquidation fees to be paid in instalments.
Where company assets and redundancy claims are insufficient, directors sometimes make a personal contribution. While this is not ideal, it can allow the company to enter liquidation properly and reduce the risk of ongoing legal exposure.
Why Liquidation Costs Are Unavoidable
Continuing to trade while a company is insolvent may expose directors to potential claims under the Insolvency Act 1986.
Worried About How to Fund Liquidation?
If you are concerned about how to pay for liquidation, you are not alone. There are often practical solutions available, whether through company assets, redundancy claims, or structured payment arrangements, that can make liquidation more manageable.
Our team can talk you through the available options and help you decide on the most appropriate next steps for your circumstances.