How Much Does it Cost to Liquidate a Company?

On average, it usually costs between £2,500 and £6,000 +VAT to liquidate a company, but it can be more or less depending on the company’s situation.

Company liquidations have to be carried out by a licensed insolvency practitioner (IP) which is why the cost can become expensive.

When it comes to finding what the cost to liquidate a company is, exact figures can be hard to come by online. That’s because there are a number of variables that can affect the price that your business will need to pay.

Of course, the best way to find an accurate price is to give us a no-obligation call and talk us through your circumstances. Our team of business specialists will be able to not only give you a better idea of the fees you might need to pay, but also which option will benefit you best.

We explain more below.

 

The appointment of a liquidator

Any insolvency procedure is essentially required to benefit the creditors’ interests.

There are many complex areas of legislation to ensure that this is the case, which is the reason that appointing an IP to liquidate a company comes at a relatively high cost.

The insolvency practitioner who is eventually appointed as liquidator will first assess the company’s assets and liabilities. The assets will then be sold at market value. Any proceeds are then used for their fees, and to make distributions to any unsecured creditors.

In the background there are usually three or more people working on a liquidation case doing checks, making sure paperwork is filed, and carrying out other due diligence.

If the case is complex, it will usually involve more people and time which is why the cost goes up.

 

 

Should I choose a liquidation?

If there are assets to be distributed then the answer would usually be yes.

Although the liquidation process is designed to benefit company creditors, don’t let this put you off – all insolvency procedures are geared this way, but it doesn’t mean that liquidation won’t benefit you as a director also.

Directors who are wary of liquidator’s investigations (in fear of misconduct accusations) will benefit from entering the liquidation process voluntarily.

This is because they have been proactive and taken action, rather than waiting for a creditor to do so.

Unfortunately, the costs of liquidation do tend to be out of reach for directors however, especially for the directors of insolvent SMEs.

There are some steps that can be taken towards funding a liquidation with no cost personally to the director though which we’ll explain further down in this post.

Read Quick Guide To The Liquidation Process

 

Company liquidation costs

So how much does it cost to liquidate a company? The fee will be largely dependent on the size of the company and the situation complexity, because the work involved for the practitioner is the major factor in the cost.

On average, in cases where the company doesn’t have a large asset value, small limited companies will cost between £2,500-£6,000 plus VAT.

We realise that this is not a straightforward answer to your question – unfortunately the figure can fluctuate considerably.

Liquidations of larger companies with a high asset value will of course come at a higher price because the more complex the process, the more time the insolvency practitioner must put into the case.

 

What does a liquidator do?

There are several duties that must be overseen by the insolvency practitioner that has been appointed. They are responsible for the valuation and sale of any assets, and the subsequent distribution between creditors (which must be proportional).

An investigation into the director’s conduct must also be undertaken, with a particular focus on the factors contributing to the insolvent position which the company found itself in.

This is the primary reason that we urge directors to get in touch at the earliest sign of things going downhill.

If it’s left too late, misfeasance could be found, resulting in the possible loss of limited liability and even disqualification of the director.

Of course, it makes perfect sense that a larger company will cost more to liquidate, but many directors do find themselves in an uncomfortable position.

As a small business ourselves, we understand that business owners might hope for a different answer from us when we’re asked, ‘how much does it cost to liquidate a company?’

Even the lower cost of £2,500 is far from small change, and may seem difficult for some to produce. However, there are several options available to companies that cannot afford to pay for a liquidation from company funds.

 

 

Find out if you are entitled to director’s redundancy

Liquidations can also be paid for by using a directors redundancy payment. Unfortunately, we find that many directors are not aware that they may be entitled to a redundancy payment which is legally authorised by the RPO (Redundancy Payments Office), along with other entitlements like notice pay and untaken holiday payments.

On average, directors are entitled to £9,000. If there are no other assets to liquidate which could be used to cover the cost, it’s a good option to look into. You may qualify if:

• You have been on the company payroll for over two years
• You work(ed) a minimum of 16 hours a week for the company

Find out more ways to fund a liquidation here

 

What is the cheapest way to liquidate a company?

The cheapest way to liquidate a company is to do it yourself via voluntary dissolution. This has much the same effect as liquidation but can cost a lot less. As you might expect though, doing it yourself can leave you open to some nasty surprises if done incorrectly, and isn’t necessarily recommended, but it is possible.

In fact, it only costs £8 to strike a business from the Companies Register. This option is best suited to businesses with minimal funds or assets. Bear in mind that it’s not quite as simple as sending off a cheque and forgetting about it either. Creditors need to be handled, stakeholders need to be informed, and assets need to be distributed before they potentially become legal property of the Crown.

Dissolution costs up to 80% less than many liquidation options and is far simpler to execute. As with all the company-closing solutions available though, the fee you pay will be dependent on the amount and complexity of assets, creditors, and any other factors that will need handling.

A limited company liquidation or dissolution can also be a stressful experience for many. Having the ability to hand over some of that responsibility to a trusted third party can often be seen as priceless in itself. Our voluntary dissolution services start from £99 for the most straightforward of cases, and usually still work out less expensive than liquidations for more complex closures. However, businesses with assets and funds over £25,000 will often benefit more from a liquidation. Liquidating a company with funds and assets ensures that money owed to you and other owners after liquidating can be taxed more efficiently, seeing you receive a larger net sum afterwards.

 

The total cost to liquidate a company may actually be higher

It’s not just the formal closure of your company that you’ll need to pay for either. There are often several other costs involved in a limited company liquidation. If you employ any staff, then you’ll need to ensure that wages are up to date, and any redundancy owed can be paid for. Likewise, any creditors or suppliers will need notifying and any bills paid up.

Depending on when you decide to close, you may also find that you could be liable for charges related to terminating service contracts early. This can be an issue not just for property rental, but also some utilities or leased equipment.

On top of all of this, there are potentially accountancy and legal costs to factor in for dissolutions, which can typically start from £500 and £300 respectively. Indeed, once business owners realise how much money and work is involved in closing a company, they often look to take on the services of an expert in business closures.

 

Next steps

If you are thinking of liquidating your business or want to know the cost to liquidate a company, Forbes Burton can offer experienced advice tailored to your personal circumstances.

We will always bear in mind your statutory duties and ensure that you cannot come under fire further down the line – of course, if we recommended services that were inappropriate it would be bad for our business, let alone yours!

Get in touch now on 0800 975 0380 to have a confidential chat with one of our experienced advisers. You can also request a FREE liquidation quote