What Is The Easiest Way To Liquidate A Company?

What is the easiest way to liquidate a company? The easiest way to liquidate a company at the lowest and cheapest cost is the voluntary strike off procedure at Companies House. That, however, suffers from some notable drawbacks in that it is not a liquidation, which means it can be objected to and blocked, meaning a formal liquidation may still be required. If a company is solvent, it might not be the most tax efficient way to close a company down.

Voluntary Strike Off – The Cheapest Route (If Eligible)

If your company is solvent and you haven’t traded for at least three months, a voluntary strike off under Companies House Form DS01 is the easiest, cheapest and fastest option. The filing fee is just £33 online, and it can take as little as two months for the company to be struck off the register.

However, this option comes with restrictions. You must not have:

• Traded or sold off stock in the last 3 months
• Changed the company name in the last 3 months
• Been going into liquidation or had a formal insolvency process initiated

You must notify all interested parties, such as HMRC, employees, and creditors, by providing them with a copy of the strike off application within 7 days of making it.

In theory, it is possible to strike off a company with debts. However, if you owe money, voluntary strike off is generally not suitable for such a company that cannot pay creditors as they can object and potentially block the process for a considerable period of time.

Members Voluntary Liquidation

If your company has more than £25,000 of assets to distribute to shareholders, then whilst a Members Voluntary Liquidation (“MVL”) is more expensive than voluntary strike off in terms of a cash outlay at the start, overall the tax efficiency of an MVL might mean it is cheaper.

Creditors Voluntary Liquidation – Insolvent Option

If your company owes money it cannot repay to creditors, the quickest formal liquidation route is a Creditors Voluntary Liquidation (“CVL”). This involves appointing a licensed insolvency practitioner to act as liquidator.

Costs vary, but many insolvency firms offer fixed-fee CVLs starting from as little as £1,500, creeping up to around £10,000, depending on the circumstances of the case. In many cases, if the company has no funds, directors can and will need to arrange to pay the liquidation fees personally. Sometimes, asset sales by the company itself can help cover the cost.

Once appointed, the liquidator takes over the company, deals with creditor claims, investigates company affairs, and ensures there is an orderly winding up of the company pursuant to the Insolvency Act 1986 requirements. The process typically begins within a month or two of instruction.

Compulsory Liquidation

This is where a creditor forces your company into liquidation through a winding-up petition. While this may seem like a way to avoid paying for liquidation yourself, it is typically a slow and somewhat uncertain process for directors. It can be cheap if the creditors do wind up the company.

They will later be dealing with people they are unfamiliar with, once the government civil servant, the Official Receiver at the Insolvency Service, is appointed as the liquidator.

Directors lose any available control over the process of going into liquidation, which is in the first instance, overseen by the Court.