If your business has reached the point where liquidation is necessary but you lack the funds or assets to cover the costs, it may feel like you have no options.
However, there are several ways to close a company even if you have little or no money. Understanding your options and taking the right steps can help you liquidate your company in compliance with UK insolvency laws while avoiding unnecessary financial risks.
Can You Liquidate a Company with Debt?
Yes, one way to close a company with outstanding debts is through administrative dissolution, also known as striking off.
This process allows directors to shut down the company as long as it has no significant debts and meets the legal requirements for dissolution. If the company owes money to creditors, however, formal liquidation is likely to be necessary.
What is Administrative Dissolution?
Administrative dissolution removes a company from the Companies House register. The process involves:
- Informing creditors and relevant authorities
- Filing the necessary paperwork with Companies House
- Ensuring all outstanding matters are addressed
If a company is dissolved correctly, there are no lasting repercussions for directors. However, this method is not suitable if the company is insolvent and unable to pay its debts.
What If You Can’t Afford to Liquidate Your Company?
If your company is struggling financially and you cannot afford the costs of liquidation, you may need to consider a Creditors’ Voluntary Liquidation (CVL).
What is a CVL?
A CVL allows directors to voluntarily liquidate an insolvent company. While this option involves fees, it gives directors more control over the process and ensures compliance with legal obligations.
What Happens If You Delay Liquidation?
Waiting for a creditor to take action and force liquidation could result in:
- Investigations into potential misfeasance (mismanagement of company funds)
- Directors being personally liable for company debts
- Higher legal and insolvency costs
Choosing a CVL rather than waiting for compulsory liquidation helps directors avoid potential wrongful trading accusations and ensures a structured closure of the company.
What Happens If You Can’t Afford a Liquidator?
If a company is insolvent and lacks the assets to cover liquidation fees, it may be difficult to afford the services of an insolvency practitioner.
How Are Liquidation Fees Covered?
- Any remaining company assets, such as stock, vehicles, or intellectual property, may be sold to cover the costs
- If the company has insufficient assets, directors may need to raise funds personally
- Some directors are eligible for redundancy pay, which can help cover liquidation fees
How to Close a Company with No Assets or Funds for Liquidation
If your company has no assets, you may need to consider alternative ways to fund the liquidation.
Personally Raising the Funds
Many directors choose to cover liquidation fees through personal means. Options include:
- Selling personal assets, such as a car or property
- Cancelling or postponing holiday plans
- Taking out a personal loan (your credit rating is not affected if your company is a limited company)
While this may seem challenging, ensuring your company is properly liquidated helps you meet your director obligations and avoids potential legal consequences.
Director Redundancy Pay
Many directors do not realise they may be entitled to redundancy pay, which can help fund a CVL.
Eligibility for Director Redundancy Pay
To qualify for redundancy pay, you must:
- Have worked for the company for at least 16 hours per week
- Have been employed for a minimum of two years
- Be owed money by the company (such as unpaid wages)
- Have received a salary through PAYE
The average redundancy payout for directors is around £9,000, which is often enough to cover liquidation costs.
What If You Cannot Claim Redundancy?
If you are not eligible for redundancy pay, your only option may be to wait for a creditor to file a winding-up petition, leading to compulsory liquidation. However, this can result in further legal scrutiny and potential personal liability.
Compulsory Liquidation vs. Voluntary Liquidation
There are two main ways a company can be liquidated:
Creditors’ Voluntary Liquidation (CVL)
- Directors initiate the process voluntarily
- Company assets are used to cover liquidation fees
- Helps directors comply with legal obligations and avoid wrongful trading claims
Compulsory Liquidation
- A creditor applies to the court to close the business
- Directors lose control over the process
- May lead to investigations into the company’s financial affairs
Waiting for compulsory liquidation can be risky. If misconduct is found, directors could be disqualified from acting as company officers and may become personally liable for debts.
FAQs About Liquidating a Company with No Money
How Much Redundancy Pay Can a Director Get?
The amount you may receive depends on:
- Your age
- Your salary
- How long you have been employed by the company
What Happens to Personal Guarantees When Liquidating a Company?
- If you signed a personal guarantee, you may still be liable for the debt even after liquidation
- Creditors may enforce the guarantee if payments were missed before liquidation
- It may be possible to negotiate repayment terms with creditors
What If a Director Cannot Claim Redundancy?
- If you are not eligible for redundancy, you may have to wait for a creditor’s petition
- This could result in investigations into your conduct as a director
Need Help Liquidating Your Company?
If you are struggling to liquidate a company with no money, professional advice is available.
Get free business debt advice
Call us today for a free consultation
Taking the right steps now can help you close your company properly and protect yourself from unnecessary legal and financial risks.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.