How to close a company with no money

I can’t afford to liquidate my company - what should I do?

If your company has no money and you’re ready to close it down, you might be unsure of your options. Voluntary Dissolution, also known as Strike Off, is the cheapest way to close a limited company, but it’s only appropriate for businesses that are solvent (can repay all their debts).

If your business is insolvent, closing it voluntarily via a Creditors’ Voluntary Liquidation (CVL) is usually the best option as it reduces the risk of adverse consequences for you personally. However, the process also attracts professional fees. 

The other route if your business is insolvent is to wait for a creditor to force the company into Compulsory Liquidation. Although there are no fees associated with the process, it carries significant risks for the company directors. 

So what is the best way to close a company with no money? Here we discuss the three closure methods in more detail and explore the different ways to pay for a voluntary liquidation.  

Three ways to close a company with no money

Company Dissolution

Company Dissolution is a cheap and relatively easy way to close a solvent limited company. You can apply online by completing form DS01 and paying a £33 fee. You must cease trading at least three months before you apply. During that time, you should wind down the company’s affairs by submitting statutory returns, settling any tax bills, paying your creditors, shutting down the payroll, closing company bank accounts and distributing any assets to the shareholders.  

You can then apply to dissolve the company. As long as there are no objections, the company will be struck from the official register at Companies House three months later.

Creditors’ Voluntary Liquidation (CVL)

You cannot dissolve the company if it’s insolvent. Instead, you must use a formal liquidation procedure. A Creditors’ Voluntary Liquidation allows you to close your company efficiently while meeting your legal duties as a company director. 

You must appoint a licensed Insolvency Practitioner to act as the liquidator and administer the procedure on your behalf. You will have to pay for their work. However, if your company has no money but has assets that can be sold at auction, the proceeds from the sale can be used to cover the fee. 

When you close your company using a CVL, you may also be eligible for director’s redundancy pay, which averages around £10,000. You can use some of that money to cover the liquidator’s fee if there are no company assets to sell. 

Compulsory Liquidation

On the face of it, Compulsory Liquidation can seem like an attractive option if there’s no money in the company. A creditor can force you into Compulsory Liquidation by issuing you with a Winding Up Petition, and the petitioning creditor will pay the liquidator’s fee. 

However, waiting for that to happen takes all the control out of your hands and increases the risk of accruing further debts you cannot repay. The conduct of the directors will also be closely scrutinised and any evidence of misconduct, wrongful trading or fraudulent trading can lead to fines, director disqualification or personal liability for some or all of the company’s debts. 

How can I pay to liquidate my company?

If your company is insolvent, the best option is to liquidate it voluntarily via a Creditors’ Voluntary Liquidation (CVL). But if there’s no money in the company, paying for a CVL, which typically starts at £3,000 to £4,000, can understandably be a worry. Fortunately, you do have options.

The sale of assets   

It’s usually the case that even a company with no cash has some valuable assets that can be sold. The liquidator will sell the company’s assets as part of the procedure before paying the proceeds to the creditors in a specific order. The liquidator’s fees are one of the first costs to be paid, which means they’re typically covered in full and the directors are not left to foot the bill.  

Director redundancy pay

It’s not only the employees who can claim redundancy pay when a company is liquidated. It’s often overlooked that many directors can claim redundancy pay too. To be eligible, you must have:

• A verbal, written or implied contract of employment
• Been employed for at least two years and worked 16 hours a week or more
• Received a monthly wage

The amount you receive will depend on your age, length of service and salary, but it could be an effective way to pay the liquidator’s fee.   

Make a payment plan

If there are no company assets and you’re not eligible for a director redundancy payment, you may have to pay for the liquidation using your own funds. One option here is to make an instalment plan with the liquidator. That will allow you to spread the cost over several months. That will reduce the financial burden, particularly if the payment is split between multiple directors.

Explore your personal finance options

If you do not have the money upfront and the Insolvency Practitioner will not accept a payment plan, a personal loan or some other form of finance could make sense. No one wants to get into debt, but at least you’ll avoid the risks associated with Compulsory Liquidation and be able to start again with a clean slate. 

Need advice?

If your company is struggling financially and cannot pay for a liquidation, you should seek professional advice from an Insolvency Practitioner immediately. Please get in touch for a free consultation or arrange a meeting at one of our offices throughout the UK.