Can You Liquidate A Company With No Money?
Can you liquidate a company with no money? No, you cannot liquidate a company if there is no money of any kind available to pay a liquidator’s fees. However, there are other options available, even if there is no readily available money in a company bank account to pay for a liquidation. Obvious alternatives include using the company’s assets or obtaining a contribution from company directors.
Using The Company’s Other Assets To Pay For The Liquidation
If a company has no cash in the bank, it can still use other assets such as stock, equipment, or vehicles to pay the liquidator’s fee. An agent can be instructed to value and enable these other assets to be realised for the best possible price so that liquidation fees can be paid.
Directors Personally Paying Liquidator’s Fee
It is very common for the directors to contribute and personally pay for the liquidation.
This is particularly the case when a company goes into creditors voluntary liquidation (the most common type of insolvent liquidation procedure). It is an insolvency procedure initiated by the directors and approved by shareholders. It involves appointing a licensed insolvency practitioner to take control, realise any assets and distribute any surplus funds available after costs to the creditors.
Payment Plans
Some insolvency firms offer instalment options to help directors spread the cost.
Statutory Redundancy Of The Director
If you are an employee of your own company (on PAYE), you may be able to claim statutory redundancy. This is the director’s own money also being used to pay for the liquidation. However, it is a claim made after the liquidation has started and not every director’s claim to redundancy will be successful. It can therefore be an unreliable means to pay a liquidation firm.
Voluntary Strike Off
It is possible to file a DS01 form at Companies House and have the company strike off voluntarily. It is a relatively cheap procedure.
However, the procedure required strict compliance with company law. A creditor can object to voluntary strike off, which can delay and even put the process on hold for a long time, leaving a director still responsible for administering the company, to file accounts, tax returns and confirmation statements. It is therefore generally unsuitable as a mechanism for liquidating a company with debts.
Court Petition For Compulsory Liquidation By A Creditor
A creditor can petition the court for the winding up of the company and for it to be placed into compulsory liquidation. This will result in a government civil servant, the Official Receiver (“OR”) to be appointed as the liquidator in the first instance.
Some directors, therefore, may simply wait until a creditor such as HMRC forces a company into compulsory liquidation. You lose control of the process of going into liquidation and you will not know who you are going to be dealing with when the investigation into your conduct as a director is undertaken by the OR.
Why Might You Need To Liquidate The Company?
A company is insolvent if it cannot pay its debts when they are due, or if its liabilities outweigh its assets. It is the director’s duty to stop trading if insolvent and liquidation is inevitable when a company does not have a viable future.
Continuing to trade in such circumstances can amount to wrongful trading, which can lead to personal liability for some element of the company’s debts or even director disqualification.
Can You Walk Away Without Liquidating?
Even if the company has no money, you cannot simply decide to walk away.
The company is a legal person until it is properly closed down. Creditors voluntary liquidation is often the preferred approach for many directors to bring that closure about.
