The cost to liquidate a company can vary largely, depending on the size of the company and its financial situation.
Company liquidation has to be carried out by licensed insolvency practitioners, which is why costs can be so high.
Keep reading to find out the exact costs involved in liquidating your company.
What are the costs of liquidation?
Generally, Company Liquidation fees vary depending on the size of the company, and the amount of work involved in the liquidation process.
Costs can start at approximately £4,500 plus VAT for small limited companies with minimal assets.
The costs can be considerably higher for larger companies which own a higher number of assets due to the additional complexity and time needed to wind up the company.
What is included in the cost of voluntary liquidation?
The cost of voluntary liquidation covers a few different areas, including the cost of hiring an insolvency practitioner to act as the liquidator.
The costs of the liquidator will cover duties such as:
- Advising directors on their duties
- Making employees redundant
- Processing claims for monies that are owed
- Setting legal disputes
- Investigating transactions that took place prior to liquidation
- Keeping creditors up to date with the liquidation process
- Valuing and selling assets
- Distributing the proceeds to company’s creditors
Is it expensive to liquidate a company?
The cost of liquidating a company all depends on the size of the company and the complexity of the case. This is based on factors such as the company’s overall financial situation, the number of creditors and shareholders, as well as the value of its assets.
As previously mentioned, starting fees for small businesses is around £4,000-£5,000, but you can expect that fee to rise considerably for larger companies.
Whether Liquidation is considered expensive is down to how much you as a Director and your company can feasibly afford.
How are the liquidation fees paid?
The cost and fees of liquidation are paid for by the sales of assets, and/or any remaining cash in the business. Creditors will receive some of their debt payments from processes.
However, it is unlikely that the creditors will receive much payment because the company usually has its liabilities in excess of its assets.
The overall return that creditors receive is dependent on the cost of the process. Therefore, creditors have a direct interest in the level of fees that the liquidator charges.
How much does a members’ voluntary liquidation cost?
The cost of a Member’s Voluntary Liquidation (MVL) depends on the type of service you require, and typically ranges from around £1,000 to £5,000.
MVLs that cost less typically require the company directors to have done all the initial work, such as paying liabilities, submitting final returns and preparing final accounts.
How much does a creditors’ voluntary liquidation cost?
A Creditors Voluntary Liquidation (CVL) usually costs in the region of £5000 with VAT for a straightforward liquidation with minimal debtors, a small amount of assets and no ongoing litigation action.
Who pays for liquidation?
Proceeds from the sale of the company’s assets will typically cover the costs of the liquidation process, as well as any money owed to creditors and any shareholder debts.
The liquidation process will be paid off first, and then the latter assets second. Therefore, as the liquidation proceeds, it can become increasingly unlikely that shareholders receive the full amount owed to them.
What if my company cannot afford to pay for the liquidation?
If a company has insufficient funds to pay for the liquidation process, directors may be required to use personal funds to pay the professional costs incurred during the liquidation of the company.
In some cases, negotiation for payment plans may be approved with insolvency practitioners to spread the cost across a series of more easily managed instalments.
This however, all depends on the company’s financial situation and the company directors’ personal financial position.
Can I liquidate my company for free?
Yes, you can liquidate your company for ‘free’ without any fees, but it is not as simple as it seems.
In some liquidation cases, the director may be able to claim for redundancy, provided they have been on a PAYE scheme.
If there is any redundancy money, this can be used towards liquidation costs. By using money raised from selling assets, as well as any redundancy claims, you can essentially liquidate a company for free as you’re not paying for the liquidation with money directly from your bank account.
If you need some advice on whether you should liquidate your company, get in touch with us today for expert insolvency advice.