How to Liquidate a Company with No Money

The responsibility of running a company does not end the moment a company becomes insolvent.
If a company no longer has the capacity to meet its financial obligations, there are still legal requirements to comply with to liquidate the company.

The way a director manages insolvency can have an ongoing impact on their reputation and financial standing.
With that in mind, it becomes increasingly important to know how to liquidate a company with no money.

What is liquidation?

Liquidation means to make an asset liquid, thereby available and divisible.
For a company, liquidation is the process of extracting the value from its assets so that value can be distributed among creditors and stakeholders.

What are the different types of liquidation?

There are three main types of liquidation, each of which result in the company ceasing to exist and its entry at Companies House erased:

1. Creditors’ voluntary liquidation (CVL)
2. Members’ voluntary liquidation (MVL)
3. Compulsory liquidation

Creditors’ Voluntary Liquidation (CVL), as the name suggests, is entered into voluntarily.

The directors of a company realise it’s insolvent and they don’t have the capacity to turn the business around.
They engage the services of a licenced insolvency practitioner (in this case, also called a liquidator) to begin the process of liquidating the company.

The insolvency practitioner will work with the directors to understand the exact situation the company is facing and present a proposal to the company shareholders.

If at least 75 per cent of the shareholders agree to the proposal, the CVL can go ahead.

Directors will no longer have control of the company; it will cease trading, and all assets will be sold to repay creditors including employees and government taxes.

This is a legal process with administrative fees and costs that the directors are responsible for meeting.

Members Voluntary Liquidation (MVL) varies from a CVL in that the company must be solvent.

It’s a voluntary liquidation process undertaken by a viable business which no longer wishes to trade and can be a tax-efficient way to close a business.

It’s also a legal process which must be conducted by a licenced insolvency practitioner with administrative costs involved.

Compulsory Liquidation is the most daunting of liquidation processes because it’s initiated by a creditor petitioning the court.

The company has a short window of time to respond to the petition before their company could be legally and forcibly wound up.

Compulsory liquidation is one answer as to how to liquidate a company with no money, as it’s a creditor petitioning the court who would need to pay the administrative fees and liquidation costs.

The emotional and psychological costs to company directors and employees of a forced liquidation, as well as the damage to professional reputation, may outweigh any perceived benefit of waiting for a creditor to petition for liquidation.

What happens if I cannot afford to liquidate my company?

If your business is already in dire financial straits, the thought of paying for your company to be liquidated may seem overwhelming and unattainable.

What options are available for how to liquidate a company with no money?

Administrative Dissolution is an option that does not need an insolvency practitioner.

The directors of a company can follow this process themselves, thus maintaining control and reducing unnecessary costs.

It’s imperative that the directors understand the legal requirements of closing a company and ensure these are met, including correct completion, and filing of all paperwork, informing all creditors, and fulfilling any existing obligations.

If administrative dissolution of a company is conducted correctly and the company is successfully ‘struck off’ it can be an effective answer to how to liquidate a company with no money.

If you prefer the peace of mind of trusting the legal requirements to experienced professionals, then you would be wise to consider a liquidation process with a licenced insolvency practitioner.

If the company does not have sufficient funds to pay for liquidation, the directors will be responsible for meeting those costs.

One way of doing so is through government-funded redundancy pay that directors may be eligible for if the company is liquidated.

If the directors are eligible for the redundancy pay it could be used in part to fund the liquidation.

How can Irwin Insolvency help?

The closure of a company can be daunting, particularly when the company has no money available to initiate liquidation proceedings.

Irwin Insolvency has more than 25 years’ experience assisting companies to understand and implement the best options for them.

Contact Irwin Insolvency today for professional advice you can trust on how to liquidate a company with no money.