How much does it cost to close and liquidate my company?
When considering the cost to close and liquidate a limited company, you first need to determine which liquidation process is appropriate for the company’s situation. To do this, you need to establish if the limited company is solvent or insolvent.
- If the company is solvent
The closure process is known as a Members Voluntary Liquidation (MVL). Our costs for this process start at £995 + VAT & disbursements. - If the company is insolvent
The closure process is known as a Creditors Voluntary Liquidation (CVL). The cost to close and liquidate through this process, will vary depending on the company’s circumstances, such as the industry and nature of the business that is carried out, the level of its debt, the number of creditors, the number of employees, and the quantity and type of assets.
How do I know if my company is solvent or insolvent?
As company director, you should always be aware of your company’s solvent position. Defined by section 123 of The Insolvency Act 1986, there are two ways of determining if your company is insolvent:
- Cash flow test
A company should be able to pay its bills and liabilities as they fall due. If not, it may be insolvent. - Balance sheet test
If your company’s liabilities exceed the value of its assets, your company could be insolvent. The amount you owe to creditors should not be more than the value of your company’s assets, including any money it currently has in the bank.
Liabilities resulting from legal action, including County Court Judgments (CCJs), that remain unpaid are another indication of insolvency.
How much is an insolvent company Creditors Voluntary Liquidation (CVL)?
The fees for a liquidation (CVL) can vary depending on the circumstances surrounding the business.
- The industry and type of business the company carries out.
- The amount of debt the company has.
- The number of creditors the company owes to.
- The number of employees.
- The type and quantity of assets within the company.
Find out more details about the cost of a CVL
How is a CVL paid for?
The cost to close and liquidate via the CVL process is paid for by the company and is usually covered by the sale of assets within the company. If there are no assets to fund the liquidation, directors will have to cover the costs personally. If the assets in the company can’t cover the costs involved, directors can pick up the shortfall themselves.
- The sale of company assets – If the sale value of your company’s assets is sufficient, the funds acquired may cover the IP’s costs.
- Director’s personal funding – This may include the sale of personal assets or the use of savings.
Find out more about employee redundancy pay
Advantages of a CVL
Closing a company through a CVL has many advantages, including but not limited to:
- Close the company and walk away
You can propose the voluntary liquidation of your insolvent company and with 75% of the shareholders agreement, the company can enter into a CVL. The process will see your company formally wound up, allowing you, the director, to walk away from the company.
- Continue to trade through a different company and purchase assets back
It is possible to liquidate your company and continue to trade the business through a newly registered or existing company. This is commonly known as a pre-pack liquidation.
These are some of the key differences when referring to a pre-pack liquidation which are agreed with us, as the liquidator, prior to your company entering a CVL:
- Some or all of your insolvent company’s assets can be purchased and transferred.
- The business can continue uninterrupted.
- Employees have the possibility of being TUPE’d
You can purchase assets from your insolvent company through a CVL, whether for personal or company use. - Unsecured debts are written off
All unsecured debt is written off with the formal liquidation of your company. Allowing you, as director to move on without the burden of this debt.
- Hold position of director at other limited companies
As director, you can continue to, or become the director of other companies, after a company you have been director of has gone into liquidation.
- Legal action stops
Any current or future legal action taken against your company, such as County Court Judgements or Winding Up-Petitions, are stopped once the company enters CVL.
- Liquidators deal with creditors
Your responsibilities as director will cease and as the insolvency practitioner, we will handle all communication with creditors, such as phone calls, letters and bailiffs. Removing the burden of any action taken against your company.
- Take control, avoid court processes and compulsory liquidation
By choosing to enter a CVL, you will have more control over the process and be able to appoint your own liquidator. By entering into a voluntary liquidation, your company will avoid being wound-up by creditors and forced into compulsory liquidation, with the Official Receiver taking control.
- Leases can be cancelled
Terms on leases and hire purchase agreements will be terminated, stopping any further payments. Any arrears owed, will be written off as your company is liquidated.
- Reduce wrongful trading accusations
By deciding to cease trading and enter into a CVL, you are prioritising your creditors interest and will limit the risk of accusations of wrongful trading, during the investigation of your company’s insolvency.
- Employee, director entitlements and redundancy pay
If eligible, both you and employees can apply for statutory entitlements, such as:
- Redundancy pay
- Holiday pay
- Outstanding payments such as:
- Unpaid wages
- Overtime and bonus/commission
- Statutory notice pay
- Directors fulfil legal obligations
You have a legal obligation to be aware of your company’s financial position at all times and to hold no creditor preferences. By entering into a CVL, this shows that as director you are prioritising creditors.
- Take control of the liquidation and choose a liquidator
A Creditors Voluntary Liquidation is an irreversible process, which cannot be undone or objected to by creditors. By choosing to voluntarily liquidate it enables you to take more control and choose their own liquidator.
What if my company cannot afford the liquidation?
The costs and fees for completing a liquidation are covered by the company. Usually, these are covered by any remaining funds in the company, or by the sale of assets through the liquidation procedure. However, if the company cannot afford liquidation, a director can look to enter the process by the use of personal funds.
How much is a solvent company Members Voluntary Liquidation (MVL)?
Our costing for an MVL has a pricing structure based on a three-tiered system designed to suit the individual requirements of each company. The cost to close and liquidate using the MVL process, is split into two different sections; the liquidators’ fees, which involve all the work and duties carried out by our insolvency practitioner, and the expenses, which are a mandatory part of the MVL process.
- £995 + VAT & expenses
- £3,995 + VAT & expenses
- £4,495 + VAT & expenses
- Bespoke MVL + VAT & expenses
Find out more details about the cost of an MVL
How is an MVL paid for?
The costs involved in processing an MVL are usually drawn directly from the company assets held in the liquidation i.e., cash at bank, and are approved by the shareholders. The balance is then distributed in accordance with the company’s shareholding. As such, we do not usually require payment upfront for an MVL.
Advantages of an MVL
The process includes many benefits to both directors, shareholders, and creditors.
- Tax advantages
An MVL can avoid the imposition of income tax, which would otherwise arise if your company applied for dissolution, where the total assets exceed £25,000.
- Capital gains
The distributions to shareholders from a Members Voluntary Liquidation, enables capital gains tax:- For lower rate taxpayers it is 18%
- For higher rate tax payers it is 24%
- Business Asset Disposal Relief (BADR)
In many cases, shareholders benefiting from distributions out of the MVL process will be able claim a further discounted rate of Capital Gains Tax through BADR.- If all your gains qualify for BADR this rate is 14%
Find out more about Business Asset Disposal Relief BADR
Tax Advice:Wilson Field does not give tax advice. As individuals and companies can have very different tax circumstances, we always recommend that you take advice from your accountant or tax specialist about Business Asset Disposal Relief before making any decisions about closing your company using the MVL process. - Capital gains
- Formal liquidation procedure
An MVL is a formal liquidation which must be carried out by a licensed insolvency practitioner (IP), such as ourselves. We will ensure that all legal procedures are properly followed, ensuring peace of mind for you as the directors and shareholders.
- Company is formally closed and wound-up
You can have peace of mind, knowing that your company has gone through a formal liquidation procedure, with the company wound-up and closed.
- Creditors fully paid out
As your company is solvent, an MVL should ensure that all creditors related to the company are paid out in full.
- Asset distribution
An MVL ensures a structured process for the distribution of assets meaning a smooth transitions of assets to shareholders, which will help avoid disputes and disagreements.
- Quick cash release
Subject to shareholders signing their indemnity, here at Wilson Field, we don’t have to wait for HMRC to grant us clearance to release the funds from the MVL process.
- Fast distribution
We will aim to distribute funds to you within 1 day of liquidation where possible.
How much does a voluntary strike-off cost?
A company director can choose to strike off a company by filling in a DS01 form for £10. Doing so removes it from the register at Companies House. A company must be solvent for the directors to strike it off and the procedure should not be used for an insolvent liquidation.
How we can help
The above liquidation procedures must be carried out by a licensed insolvency practitioner. Our licensed insolvency practitioners are qualified to carry out the above procedures. Our experienced initial advisors can discuss your company and its situation, whether your company is solvent or insolvent, and assess the options available. We can also help advise you on alternative insolvency procedures which could be appropriate for your company.
- Repay your company debts in a payment plan via a Company Voluntary Arrangement (CVA)
A CVA is a payment plan between a company and its creditors that allows you to restructure your company’s unsecured debts, while continuing to trade, by making affordable monthly payments over a fixed period. We start by assessing your company’s financial position, determining a realistic repayment amount. These terms are then proposed to your creditors and if approved, your company enters the repayment plan. When in place, all interest and charges are dropped and creditors in the arrangement cannot take further legal action. The process lasts for up to 5 years and on successful completion, any remaining unsecured debt in the arrangement is written off.
- Restructure your company through administration
Administration is an insolvency procedure for companies. Entering the procedure, your company will be in a temporary state of protection by a moratorium that halts creditor action, including legal proceedings, giving your company the breathing space to continue trading. We will act as administrator and our primary purpose is to rescue your company as a going concern, attempting to restructure and turn it into a leaner, more profitable organisation. If rescuing the company isn’t a viable option we will also look at the most appropriate exit strategies from administration, whether that be a potential sale of the business, assets, the whole company, or transitioning to an alternative insolvency procedure.
- Close your company down and start again via a pre-pack liquidation
A pre-pack liquidation is a type of CVL where the sale of your company’s assets is arranged before liquidation, allowing business operations to continue seamlessly under the purchasing company. The company name may be reused, and employees can transfer under TUPE. Contracts and essential agreements can also be included as part of a sale, ensuring minimal disruption to your business operations. This process eliminates the unsecured debts of your previous company, providing a fresh start free from previous unsecured liabilities.
How to get in touch with us: The next steps
- Speak with our initial advisers
Make contact with our team via phone, filling in a form, or online chat. We will assess your circumstances and, if suitable, arrange a free consultation with a consultant to discuss your company’s situation. - Initial assessment
During the consultation, we will advise if an insolvency procedure is the most appropriate route forward or whether alternative solutions better suit your company’s problems. - Formally engage with Wilson Field
If there is an appropriate insolvency solution, we will confirm the necessary steps to start the procedure and will issue you with the relevant documentation for you to formally engage us.
In summary
The cost to close and liquidate a limited company can depend on several variables and circumstances. Whether the company is solvent or insolvent significantly impacts the route forward and associated costs.
- The cost to close and liquidate a limited company via a Creditors Voluntary Liquidation can vary. It will depend on the industry and nature of the business, its level of debt, the number of creditors and employees, as well as the type and quantity of assets.
- We have a three-tiered pricing structure for closing a solvent company through a Members Voluntary Liquidation. Our cost for an MVL starts at £995 + VAT and expenses.
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