Where to begin

First and foremost, if your company is struggling financially and you are considering placing it into liquidation but are worried about funding the process, please contact us for an initial no-obligation chat. Whilst a formal liquidation is indeed an option, there may well be other avenues that we can explore, such as refinancing, dissolution or a voluntary arrangement.

Once we have considered all the options and decided that liquidation is indeed the best way forward for your company, we will look at the costs involved. As each liquidation is different, it could well cost you less than you think.

Can't afford to liquidate

Creditors’ Voluntary Liquidation (CVL)

A Creditors’ Voluntary Liquidation (CVL) is the most common procedure for closing an insolvent limited company. Here, the company directors choose to voluntarily start the liquidation process, which is different from a compulsory liquidation, which is forced on the company by its creditors.

Choosing a CVL allows you more control over the liquidation possess, which is particularly important if you are considering purchasing assets from the liquidator and setting up what is known as a phoenix company to continue trading. Subject to creditors’ approval, you can also choose your own liquidator and place the company into liquidation at an earlier stage, which is often preferable than having to wait for the company to be finally wound up.

You can find out more about Creditors’ Voluntary Liquidation here.

How can I fund a liquidation?

Legally, a limited company is a separate entity, so it is usually responsible for funding its own liquidation costs. This can be achieved in a few different ways:

1. By selling the company’s assets

Your appointed liquidator will oversee selling the company’s assets, including any stock, work-in-progress etc. The assets will usually require a valuation to make sure that they are being sold for a realistic amount. The realisation of assets also covers the liquidator’s costs and fees. However, if the funds are insufficient, then you may wish to consider paying for the fees yourself. You may only want to buy the company’s assets if you wish to continue the business. If the company is struggling due to historical debts then a fresh start , debt free in a new company may be the way forward for you.

2. By personally raising the funds

You may wish to consider raising the funds to pay for the liquidation by selling some of your own personal assets. This could be by a loan or other form of credit, or it could be saving money by not going on holiday or perhaps downgrading to a cheaper car.

3. By using your director’s redundancy pay

As a director of a limited company, you may be entitled to redundancy pay, which could help you to fund the liquidation process. There may be other entitlements available too, including unpaid wages, holiday pay and notice pay.

What if I still can’t fund the liquidation?

Unfortunately, if you still can’t raise the funds to pay for a CVL, then the only available alternative is compulsory liquidation. If a creditor is owed more than £750, then they can apply for what is called a winding-up petition, which begins the process of compulsory liquidation. For a Court to approve the winding-up petition, the creditor must demonstrate that all possible actions have been taken to attempt to collect the money that they are owed.

Next steps

If you’re concerned about whether you can afford a liquidation to close your company, then our team at 1st Business Rescue can take you through all of your options and offer advice on how the liquidation process could potentially be funded.

Please get in touch and we’ll come back to you
without delay.

Call 0808 506 2246
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