When a limited company becomes insolvent and there is no chance of rescue or restructure, liquidation becomes the only remaining possibility. But directors do have the option of voluntarily liquidating their company, rather than waiting for a creditor to wind it up.
A Creditors’ Voluntary Liquidation (CVL) places creditor interests to the fore, as demanded by UK insolvency laws, but the directors of companies with no assets may not be aware that this is a viable option.
A no asset liquidation in the form of a CVL offers further significant advantages to directors:
A CVL can be quickly initiated online by directors, and because the process no longer requires in-person meetings with the company’s creditors, it can be expedited at various stages.
Initially, however, a winding-up resolution is passed if 75% (by value) of shareholders vote in favour. Companies House is informed, and an advert announcing the resolution is placed in the Gazette.
A liquidator is appointed, who assists directors in preparing the Statement of Affairs. This essentially details the reasons for the company’s financial predicament, and is sent to creditors who are then invited to make their claim against the company.
Once the liquidation process has been completed, the company closes down and is removed from the register at Companies House, but the liquidator’s investigations may continue if necessary.
In general terms, the duration of a Creditors’ Voluntary Liquidation can be up to 12 months, but because it is a no asset voluntary liquidation, this timescale is likely to be considerably reduced.
Directors working for the company under a contract of employment may be eligible to claim redundancy pay from the National Insurance Fund (NIF). The average claim for director redundancy is currently £9,000, a considerable sum that could be used to pay the liquidator’s fees and also potentially some of the company’s debt.
So how much might a no asset liquidation cost? For a small limited company the cost is likely to be around £4,000 or £5,000 plus VAT. Much of the work involved in a corporate liquidation lies in valuing, realising, and distributing a company’s assets, so a liquidation process with no assets will naturally cost less than a ‘standard’ liquidation.
If you would like more information about no asset liquidations, or require specific advice about your own company’s situation, our experts at Begbies Traynor can help. We are the UK’s leading professional services consultancy, and operate from over 40 offices nationwide. Call one of the team to arrange a free same-day consultation.