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07833 240747

How to Liquidate A Company With No Money

Published on : 24th January, 2024 | Updated on : 24th January, 2024
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Written ByEric Walls MIPA FABRP

Director of Insolvency and Turnaround

Eric is a licensed insolvency practitioner regulated and licensed by the Insolvency Practitioners Association. His ethos is always "give the right advice, choose the right options, rescue first if possible." He has many years’ experience in accounting and insolvency having worked at Touche Ross (Deloitte) and has been involved in turnaround and insolvency since the late 80's.
Keith and Eric first met in a pub in Darlington in 2000(!) and have worked closely ever since, with Eric as a partner in Marlor Walls and now a director of KSA Group.
Eric has acted as nominee and supervisor of over 350 CVAs in that time and knows the pressures and difficulties of that approach on all parties involved in making the effort for a successful rescue of the business.
From smaller “family owned” companies, to businesses with a turnover exceeding £20 million, a CVA can prove an invaluable rescue package, securing not only a better return for creditors than might otherwise be generated, but also allowing the business to survive and to continue to work with its trusted suppliers.

Eric Walls MIPA FABRP
closed sign on shop

Table of Contents

  • Dissolution as a way to close a company with no money
  • What about using directors’ redundancy to pay for the liquidation?
  • Can I liquidate the company myself?

Dissolution as a way to close a company with no money

If the company has no money and it needs to close down then, providing that it does not owe creditors substantial sums, it can seek to be struck off or dissolved.  This process is known as dissolution and is governed by Sections 1003 to 1008 of the Companies Act 2006 (formerly Section 652 of The Companies Act 1985)

However, bear in mind that dissolving the company (removed from the Companies House Register) can only happen if the following conditions apply:

  • The company has not traded for three months; there must be a genuine cessation of trade.
  • The company has no assets, property or cash at the bank.
  • The creditors are informed, requesting their permission for the company dissolution.
  • Creditors are given three months to consider the request to dissolve the company and can reject such a request.
  • The company has not changed its name during this period.
  • The company has not disposed of any property or assets (this may include land and buildings, plant and equipment, debtors and other assets).

If the company does have debts, say about £5000+, then really the company needs to be liquidated.  A company that is insolvent will need to be liquidated using either a Creditors Voluntary Liquidation (CVL) or the creditors themselves will petition the court, using a winding up petition, to force the company into a court led process also known as a compulsory liquidation.

So, if the company has no money and the directors do not have the funds to go down the route of a CVL then they will need to brace themselves for the compulsory process.  This is risky for them personally and is not a pleasant process.  What is more it can take about a year to be completed stopping the directors from moving on with their lives.  This will be the consequence of running down all the funds in the company.

Even if you do manage to dissolve the company with debts then it can actually be resurrected up to 3 years later and wound up by court with the directors being investigated.  This is covered by the The Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act.

What about using directors’ redundancy to pay for the liquidation?

Beware companies telling you this.  Directors will need to show that they were legitimately employed i.e. being paid a proper salary via PAYE for the work they have done.  Being paid for holidays and having a proper contract.  The Redundancy Payments Office (RPO) are routinely rejected directors claims as they see their “salaries” often as just extracting sums from the company in their capacity as office holder.  If they are working all hours on the business but only paying themselves £700 a month on PAYE then that is below minimum wage so they are not actually “legally employed”

Can I liquidate the company myself?

No you can’t. It is true that only its shareholders can start the process but a licensed insolvency practitioner has to actually do the liquidation.