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How Much Does it Cost to Liquidate a Company?

If you need help or advice regarding any aspect of liquidating a limited company, we are here to help. Please feel free to contact  the Marchford team today.

How Much Does it Cost to Liquidate a Company?

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As businesses navigate the competitive and often turbulent waters of the market, situations may arise where it’s necessary, or even advantageous, to close shop. 

This conclusion might stem from a myriad of reasons – perhaps the business is no longer viable, or it has served its purpose and the directors wish to move on.

In any case, one viable route to this end is company liquidation.

Yet, many businesses grapple with understanding the associated costs. 

This article will explore the costs of liquidating a company in the UK, focusing on various aspects of the process and providing detailed insights.

Related Post: What is the Cheapest Way to Liquidate a Company?

How Much Does it Cost to Liquidate a Limited Company in the UK?

In the United Kingdom, the cost to liquidate a limited company is not static.

It can fluctuate considerably depending on several variables such as the size of the company, its complexity, the number of creditors, and whether there are any contentious matters that may require resolution.

As a ballpark figure, you can expect costs to fall anywhere between £4,000 and £6,000, although it can rise significantly for more complex scenarios.

For example, a company with a large number of creditors and extensive assets would necessitate the liquidator to spend more time liaising with the creditors and managing the assets.

This added time investment naturally correlates with increased costs.

Conversely, a smaller company, boasting fewer creditors and simpler operational mechanics, would likely face a lesser liquidation cost.

It’s also worth noting that the method of liquidation can affect the cost.

For instance, voluntary liquidation (initiated by the company’s members or directors) might be less costly than compulsory liquidation (imposed by the court), simply because the latter involves legal costs related to court proceedings.

Related Post: How Long to Liquidate a Limited Company?

How Much Does a Members Voluntary Liquidation Cost?

A Members Voluntary Liquidation (MVL) is typically used by solvent companies seeking to wind up their operations and distribute any remaining assets among shareholders.

Given that the company is solvent, the liquidation process is usually less complicated and therefore potentially less costly than that of an insolvent liquidation.

Starting costs for an MVL might be around £3,000. However, these costs can escalate depending on several factors.

The complexity of the company’s assets plays a key role in determining the overall cost.

For instance, if a company has a diverse portfolio of assets spread across multiple jurisdictions, the process of realising these assets can be time-consuming and expensive.

Furthermore, the number of shareholders also impacts the cost.

A large number of shareholders would require more administrative work in terms of distributing assets, and this could drive up costs.

Additionally, the level of assistance the company requires from the Insolvency Practitioner (IP) can also impact the final bill.

If the IP needs to provide extensive advice or carry out additional tasks, this would generally be reflected in the cost.

How Much Does a Creditors Voluntary Liquidation Cost?

In contrast, a Creditors Voluntary Liquidation (CVL) is a process initiated by directors when a company is insolvent and can no longer pay its debts.

Given that a CVL involves dealing with creditors and resolving debt issues, it typically comes with higher costs than an MVL.

The average cost of a CVL in the UK can range between £5,000 and £7,000, but this can vary depending on the size and complexity of the company.

Much like with an MVL, the costs can increase based on the complexity of the assets, the number of creditors involved, and the level of assistance required from the IP.

In cases where there are contentious issues or disputes over the company’s assets, the process could become complicated, leading to increased costs.

Related Post: How to Liquidate a Company For Free

How Much Does a Compulsory Liquidation Cost?

Compulsory liquidation, as the name suggests, is not a voluntary choice by the company’s directors or members but a process instigated by the court, usually at the request of creditors.

This process tends to be more expensive than voluntary liquidation due to the involvement of court proceedings and the need for the Official Receiver or an appointed IP to administer the liquidation.

The cost of compulsory liquidation in the UK often starts around £6,000, but can escalate significantly depending on the case’s complexity.

For instance, if the company has significant debts or if there are disputes over assets or creditor claims, the liquidator would need to invest more time and resources, leading to increased costs.

What is an Insolvency Practitioner?

An Insolvency Practitioner (IP) is an individual who is authorised to act in connection with an insolvent individual, partnership, or company.

In the UK, IPs are licensed and regulated to ensure they possess the necessary qualifications and experience to undertake their responsibilities effectively.

The role of an IP in the liquidation process is multifaceted.

They’re tasked with assessing the company’s assets and liabilities, collecting and selling the company’s assets, settling claims with creditors, and making sure all legal and regulatory requirements are fulfilled.

The cost of employing an IP forms a significant chunk of the liquidation cost.

The amount they charge is commensurate with the complexity of the case and the time required to handle it.

Related Post: How to Liquidate Your Limited Company with Debt

Who Pays for the Liquidation?

Determining who pays for a company liquidation can sometimes be as complex as the liquidation process itself.

The direct answer is that the cost of liquidation should ideally be covered by the company’s assets.

When the company decides to liquidate, its assets, including physical assets, outstanding receivables, and intellectual property, are valued and sold off to cover the costs of the liquidation process.

This involves paying the fees of the Insolvency Practitioner (IP), any legal fees incurred during the process, and disbursements that arise from the liquidation.

However, there are scenarios where the company’s assets may not suffice to cover these costs.

If the company is heavily insolvent with little or no valuable assets, the question of who pays the liquidation costs becomes more complex.

In such instances, directors or shareholders may be asked to cover these costs personally. 

Furthermore, in a Members Voluntary Liquidation (MVL), the members (shareholders) of the company may need to pay the liquidation costs upfront, especially if the company assets are tied up and cannot be immediately realised.

However, these costs can often be recouped once the company’s assets are sold.

There are situations, too, where creditors might agree to bear the liquidation costs, particularly if they believe they can recover their debts by selling the company’s assets.

This is more common in cases of Compulsory Liquidation , where the petitioning creditor usually pays the upfront costs.

Therefore, it’s crucial to consult with a licensed IP or legal professional to understand the implications and potential liabilities when it comes to paying for liquidation.

How Are the Costs of Liquidation Paid?

The payment of liquidation costs follows a fairly standard procedure, but it may differ based on the type of liquidation and the specific circumstances of the company.

As a rule of thumb, the costs of liquidation are paid out of the company’s assets.

The first step in the liquidation process, whether voluntary or compulsory, involves the IP taking stock of the company’s assets.

Assets can include physical properties such as land, buildings, and equipment, but they can also comprise cash in bank, investments, accounts receivable, and intangible assets such as patents or trademarks.

Once the assets are valued, they are sold, often through auction or private sale, to convert them into cash.

This cash is then used to cover the costs of liquidation.

The IP’s fees are generally paid first, followed by any other costs such as legal fees and administrative costs.

In an MVL, the process is somewhat simpler because the company is solvent.

The members (shareholders) usually pay the liquidation costs upfront, and these costs are then recovered from the distribution of the company’s assets.

In a CVL or compulsory liquidation, the situation can be more complex.

If the company’s assets do not cover the costs of liquidation, directors may have to make personal contributions.

Creditors might also agree to fund the liquidation if they believe that they can recover more of their debts this way.

If there are insufficient assets to cover the costs of liquidation, and directors or shareholders cannot or will not cover these costs, the company can be struck off the register at Companies House.

However, this doesn’t offer the same level of finality as a liquidation, as the company can be reinstated, and the liability for the company’s debts can still fall back on the directors or shareholders.

As such, navigating the liquidation process and understanding how the costs are paid can be complex and stressful.

Seeking professional advice early can make the process more manageable and less uncertain.

Which is Better, Company Liquidation or Dissolution?

The decision between liquidation and dissolution depends on the specific circumstances of the company.

For instance, if the company is solvent and the directors wish to retire or move on to new ventures, an MVL might be the most suitable choice.

Dissolution, on the other hand, is generally the simplest and cheapest way to close a company.

However, it is only applicable for dormant or non-trading companies.

In contrast, if a company is insolvent, then a CVL or compulsory liquidation might be required.

However, these methods come with a higher cost due to the work involved in resolving debts and distributing assets.

What Happens if You Can’t Afford Liquidation Fees?

In situations where a company cannot afford the fees associated with liquidation, it may be struck off or dissolved by Companies House.

However, this process does not provide the same level of protection from creditor claims as a formal liquidation process. 

As such, directors could still potentially be held personally liable for the company’s debts.

In some instances, directors may be able to negotiate a payment plan with their IP, or they may qualify for financial assistance to cover the costs of liquidation.

It’s essential to seek advice from a professional adviser or a licensed IP when facing such circumstances.

Will I be Entitled to Directors Redundancy During Liquidation?

Under certain conditions, directors may be eligible for redundancy payments during liquidation.

Generally, this is applicable if they have been employed under a contract of employment, working a minimum number of hours per week, and have been with the company for at least two years. 

The redundancy payment can often offset the costs of liquidation, making the process more financially manageable for the directors.

However, eligibility for redundancy payments is subject to specific rules and conditions.

Thus, professional advice should be sought to understand any potential entitlement.

Final Thoughts On How Much it Costs to Liquidate a Company

The cost to liquidate a company in the UK can vary significantly depending on a multitude of factors, including the size and complexity of the company, the type of liquidation, and the amount of work required by the IP.

Understanding these costs and their implications is vital when considering the best course of action for a company.

Should you find yourself uncertain about the liquidation process or its costs, professional advice from a licensed insolvency practitioner is highly recommended.

They can assess your specific situation and offer the most appropriate advice.

Acting sooner rather than later opens up more options and potential strategies, enabling you to handle the process more effectively and with fewer complications.

Do You Need to Liquidate a Limited Company?

Are you navigating the challenging waters of company liquidation?

Uncertain about costs, legal implications, or the steps involved? 

Let the experts at Marchford guide you.

With our extensive experience in limited company closures, we provide tailored solutions to help ease your journey.

Don’t let the complexities of the process overwhelm you – lean on our expertise and let us help secure the best possible outcome for you and your company. 

Contact us today for a free, no-obligation consultation.

Together, we can make the process of company liquidation less daunting and more manageable. Choose Marchford, where your peace of mind is our priority.

For free confidential advice, get in touch today.


Hannah Paull

Hannah Paull

Hannah Paull is a co-director at Marchford with over 25 years experience as a trained accountant, including lecturing the AAT Accounting Qualification. After specialising in company closures and insolvency, Hannah has, for the last 5 years helped hundreds of directors of struggling limited companies with a wide range of solutions including company closures.


Hannah Paull

Hannah Paull

Hannah Paull is a co-director at Marchford with over 25 years experience as a trained accountant, including lecturing the AAT Accounting Qualification. After specialising in company closures and insolvency, Hannah has, for the last 5 years helped hundreds of directors of struggling limited companies with a wide range of solutions including company closures.
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