Liquidating a Company with No Money
If your company is insolvent but has little or no cash, you may be wondering how you can afford to place it into liquidation.
This is a common problem. A company can reach the point where it needs to close precisely because its cash has run out.
Having no money in the bank does not necessarily mean that a Creditors’ Voluntary Liquidation is impossible. The first step is to look at the company’s overall position, including any assets, money owed to it and other resources that may be available.
Can you liquidate a company with no money?
Potentially, yes.
There is an important difference between a company having no cash and having no assets or value at all.
A company with an empty bank account may still own assets or be owed money that needs to be taken into account.
Before deciding that a CVL cannot be funded, we will normally look at:
- Cash held in any company bank accounts
- Outstanding customer invoices
- Stock
- Vehicles
- Plant and machinery
- Office and computer equipment
- Property or property interests
- Deposits and other amounts due back to the company
- Tax refunds or repayments that may be due
- Intellectual property or other valuable business assets
- Money owed to the company by directors or connected parties
The existence and value of those assets will affect both the insolvency process and how the liquidation can be funded.
How can a CVL be funded?
Depending on the circumstances, there are several potential sources of funding.
Company cash
If the company still has money available, it may be possible for company resources to be used appropriately towards the costs associated with the insolvency process.
Company assets
Assets realised in the liquidation can be used in accordance with the statutory rules governing the expenses and administration of the winding up.
Money owed to the company
Outstanding customer debts and other amounts due to the company are company assets. Their likely recoverability should be considered when assessing the position.
Director or shareholder contribution
Where there are insufficient company resources to meet the initial cost of progressing a voluntary liquidation, a director or shareholder may choose to make a contribution to enable the CVL to proceed.
That contribution is not the same thing as accepting personal liability for all of the company’s debts.
Does paying for a CVL make me personally liable for the company’s debts?
No. Making a personal contribution towards the cost of a liquidation does not, by itself, transfer the company’s debts to you.
A limited company is a separate legal entity and company liabilities generally remain liabilities of the company.
There are separate circumstances where a director may have personal exposure, including:
- Personal guarantees
- An overdrawn director’s loan account
- Certain transactions involving the director or connected parties
- Specific findings arising from director conduct
- Other statutory grounds for personal liability
Those issues should be considered separately from the question of how the CVL itself is funded.
Do not assume the company has no assets
Directors often tell us that a company has “nothing left” when what they really mean is that there is no cash in the bank.
For example, a business may have stopped trading but still have:
- £10,000 of unpaid customer invoices
- A van or other vehicle
- Stock remaining at the premises
- Equipment with a resale value
- A rent or utility deposit due back
- Money owed to the company through a director’s loan account
These are still company assets and need to be dealt with properly.
We will help you identify what the company actually owns before reaching a conclusion about how the liquidation can be funded.
Can I sell company assets to pay for the liquidation?
Potentially, but directors need to be careful once the company is insolvent.
Company assets belong to the company. They should not simply be transferred to directors, shareholders or another business because the company is about to close.
If an asset is going to be sold before liquidation, issues such as its proper value, the identity of the purchaser and how the sale proceeds are used may all be relevant.
Take advice before selling or transferring company assets once insolvency is apparent.
What if I want to keep some of the company’s assets?
A director, shareholder or new company may sometimes wish to purchase assets from the insolvent business.
The fact that the proposed purchaser is connected with the existing company does not mean that assets can simply be taken or transferred at an arbitrary value.
Any proposed transaction needs to be considered properly, with appropriate attention to the value of the assets and the interests of creditors.
If preserving part of the underlying business is important to you, raise this at the beginning of the discussion rather than dealing with the assets yourself first.
What if the company genuinely has no assets at all?
If there is no cash, no recoverable money and no realisable company property, there may be nothing within the company itself to contribute towards the initial costs of arranging a voluntary liquidation.
That does not mean directors should simply ignore the company.
We can look at:
- Whether a director or shareholder contribution is practical
- Whether any overlooked company assets or recoveries exist
- Whether the company needs to enter liquidation immediately
- Whether another insolvency or closure route needs to be considered
- Whether creditor action is already likely to determine what happens next
The right answer depends on the company’s debts, creditor pressure, trading status and the position of its directors.
Can I just strike the company off instead?
Directors sometimes consider applying to Companies House to strike off the company because the fee is much lower than a formal liquidation.
Strike-off and liquidation are not the same process.
A company must satisfy the statutory conditions before applying for voluntary strike-off. Creditors and other interested parties can also object to a proposed strike-off, including where the company owes them money.
If the company has substantial unpaid debts, creditor pressure or unresolved insolvency issues, you should not assume that an application for strike-off will provide a simple alternative to dealing with those problems.
We can explain the difference between dissolution and liquidation after reviewing the company’s circumstances.
What happens if I simply leave the company?
Ignoring an insolvent company rarely makes the underlying problems disappear.
Creditors may continue collection or enforcement action and may, depending on the circumstances, pursue formal court proceedings.
Meanwhile, directors continue to have responsibilities in relation to the company and its records.
Taking advice does not mean you have committed to liquidation. It allows you to understand what action, if any, actually needs to be taken.
What if the company has stopped trading?
A company does not need to still be actively trading before directors seek advice about a CVL.
Many directors contact us after:
- The business has ceased trading
- Employees have already left
- The company’s bank account is empty
- The premises have closed
- Customers have stopped placing orders
- The director has decided that the business cannot continue
The remaining company assets, liabilities and records still need to be considered, and the company continues to exist legally until it is dealt with through an appropriate process.
What if the company has no money because HMRC has taken everything?
HMRC debt is one of the most common reasons for severe cash-flow pressure.
A company may reach the point where PAYE, VAT or Corporation Tax arrears have built up while available cash has been used simply to keep the business operating.
The absence of cash does not remove the need to address the company’s overall insolvency position.
If HMRC is already taking enforcement action or threatening winding-up proceedings, the available options may become more time-sensitive.
What if I cannot personally afford to fund the liquidation?
Tell us at the outset.
We do not assume that a director of an insolvent company has personal funds available simply because the company needs to be closed.
We will first establish:
- What resources the company itself has
- Whether any assets can be realised
- Whether money is due to the company
- What level of work the case actually requires
- Whether our straightforward CVL pricing applies
- What realistic options remain if no funding is available
You will then be able to make a decision based on the actual position rather than assuming that formal insolvency is unaffordable.
How much does a straightforward Scottish CVL cost?
Our entry-level CVL fee: £3,500 plus VAT and disbursements (usually between £400 to £650)
We will review the company’s position before asking you to proceed and explain what the quoted price includes.
If the case involves circumstances requiring significant additional work, we will identify those and explain the likely cost before you make a decision.
Liquidating a company
with no money FAQs
Can a company enter a CVL with nothing in its bank account?
Potentially, yes. The bank balance is only part of the picture. The company may have assets or money owed to it, or a contribution from a director or shareholder may be available to enable the voluntary process to proceed.
Do I have to use my own savings?
Not automatically. We first look at what resources belong to the company. Where there are insufficient company resources, a personal contribution is one possible way of funding a voluntary liquidation, but the available options should be considered before you decide what to do.
Can I sell the company van or equipment to pay the CVL fee?
Company assets need to be dealt with at an appropriate value and in the interests of the company and its creditors. Take advice before disposing of assets or transferring them to yourself or another business.
Can I dissolve the company instead of liquidating it?
Dissolution and liquidation are different processes. Creditors can object to a proposed strike-off where they have grounds to do so, including where the company owes them money. Whether strike-off is appropriate depends on the company’s circumstances.
What if the company owes HMRC but has no assets?
HMRC remains a creditor even where there are no company assets available. The company’s overall insolvency position still needs to be dealt with, and creditor enforcement may affect what options remain available.
Will speaking to an insolvency practitioner cost me anything?
Our initial discussion is intended to establish the company’s position and whether a CVL or another route is appropriate. It does not commit you to proceeding with a liquidation.
No money left in the company?
Find out what your options are.
If your company cannot pay its debts and there is little or no cash left, do not assume that you have no options.
We can review the company’s assets, liabilities and current position, explain whether a CVL is practical and tell you what it is likely to cost before you make any commitment.