Insolvency fees can seem prohibitive when your company is facing liquidation. Business assets are no longer at your disposal, and the interests of creditors must be placed first. But there is a method of voluntarily liquidating an insolvent company, essentially for free, if you meet the qualifying conditions.
A Creditors’ Voluntary Liquidation, or CVL, is a preferable option to waiting for a creditor to wind-up your company. Voluntarily placing the business into liquidation demonstrates your understanding and compliance with insolvency rules regarding creditor interests, and protects you from accusations of wrongful trading.
Paying the insolvency practitioner’s costs
A key consideration if you’re wondering how to pay the insolvency practitioner’s fees, is whether or not you’re an employee of the business as well as a director. If you can establish that you’ve fulfilled a role similar to your employees, you may be able to make a claim for redundancy pay from the National Insurance Fund (NIF).
The average redundancy claim is currently £9,000 – a substantial sum that should pay the costs of a CVL. To be regarded as an employee, you’ll need to have:
For a small company with few assets the costs of voluntary liquidation are generally £4,000-£5,000, although these fees will rise for companies with a larger asset base.
How to liquidate a company yourself
The Creditors’ Voluntary Liquidation process can be initiated yourself online. With the new methods of communication that have now been introduced, this formal insolvency procedure can also be expedited at various other stages.
No longer are in-person meetings the default requirement during this process. This makes a previously administration-heavy procedure faster and easier to negotiate. The Insolvency Rules, 2016, overhauled legislation originally introduced in 1986, and that had been amended 28 times during the intervening years.
You can appoint an insolvency practitioner of your choice to administer the liquidation. If you claim redundancy pay you should be able to pay their fees, and may even have sufficient money to repay some of the company’s creditors.
Covering insolvency practitioners’ costs
If you feel that you can’t afford to pay a liquidator’s fees, claiming redundancy offers a lifeline for you and fellow directors. Although you do have the option of waiting for a creditor to wind up the company, this alternative isn’t without significant drawbacks.
If any incidences of unlawful trading or director misconduct are found during the years leading up to insolvency, you could face disqualification for 2-15 years, financial penalties, and personal liability for the company’s debt.
For more information on voluntary liquidation and claiming redundancy as a director, call our expert team to arrange a free consultation. Begbies Traynor is the UK’s largest professional services consultancy, and with 47 offices nationwide, we can quickly identify your best options.