What is the cost of liquidating a company

The most widely used process for closing a limited company that is insolvent is with a creditors voluntary liquidation (CVL).

The directors of a company voluntarily make the decision to embark on a CVL and by contrast, compulsory liquidation is forced on a company by its creditors.

Voluntary liquidation of a limited company can be done for the purpose of closing a business for reasons other than insolvency and is known as a members’ voluntary liquidation.

The liquidator takes control of the company’s affairs and almost all powers of the directors cease.

The liquidator disposes of all the company’s assets and, after paying the costs and expenses of the liquidation, distributes any remaining money to the creditors.

Clients often find this an unattractive and cumbersome prospect and, as a result, opt for the less satisfactory alternative to liquidation, which is to stop paying annual registration fees and "let the companies lapse".

The reason this alternative is less satisfactory is because it will take seven years from the date that a company is struck off the register for non-payment of fees for it to be dissolved.

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