How do you close an insolvent company with debts and no assets?

 When an insolvent company is liquidated and closed down, its assets are sold to raise the necessary funds to pay back the company’s creditors. Whilst not every creditor is likely to get their money back, most priority creditors are successful.

There are two forms of insolvency procedure for a company with debts and assets – a Creditors’ Voluntary Liquidation (CVL) or a compulsory liquidation. However, for a company with debts and no assets, it’s a slightly different situation. Liquidating a company costs money but if there are no assets and only debt, how do you close an insolvent company with debts and no assets?

The cost of closing an insolvent company

Firstly, whether the company is solvent, i.e. no debt, or insolvent, any liquidation or insolvency process must be managed by a licensed insolvency practitioner (IP); that’s the first cost that has to be paid.

There are also the costs of paying any outstanding monies to HMRC, such as PAYE and corporation tax. Any loans have to be paid back to the banks, any redundancy costs must be paid, priority creditors need to be paid and any outstanding rents must also be settled.

On average, it costs between £4,000 and £6,000 to liquidate an insolvent company that has few creditors, not too many assets and no other complications. With a compulsory liquidation process, the liquidation fees are the responsibility of the creditor petitioning the court for a winding up order. In the case of a voluntary liquidation process, the company’s assets pay for the liquidation fees. Read more