Liquidating a company with no money

Directors who are also employees of the company can typically claim redundancy from the Redundancy Payments Service (RPS) when the company enters CVL. Eligibility requires:

• ›Director must have been an employee (not just an office holder) of the company — typically requires PAYE registration and salary payments.
• ›Continuous employment of 2+ years.
• ›The company must enter formal insolvency procedure (CVL or administration).

The RPS pays statutory redundancy plus arrears of pay (capped), notice pay (capped), and accrued holiday pay (capped). Typical payments to a director-employee with 5+ years’ service: £8,000–£25,000+. This payment can fund the CVL fee directly. The IP can advise on the redundancy claim process at the initial consultation.

Many directors simply pay the IP fee from personal funds. Simple CVL fees start at £2,500 + VAT and disbursements — approximately £3,000–£3,500 all-in. Most directors can fund this from personal savings, a personal loan, or family support. Personal funding is the most common route in practice.

If the company has any modest remaining assets (cash on hand, stock, debtors, equipment), the IP can typically fund the fee from realisations. The IP’s fee is paid as a priority from the liquidation account once realisations are received. For companies with £5,000+ in realisable assets, this is often the cleanest route.

Some IPs (including IQ Insolvency for simple cases) will accept a deferred fee arrangement — the fee is paid in instalments after the procedure commences, funded from director redundancy or modest realisations. This requires confidence in the funding source and is typically only available for simple-case CVLs.

Where no funding is available, a creditor may eventually petition for compulsory liquidation. The Official Receiver (a government official) acts as initial liquidator at no direct cost to the company. The process is less director-friendly than CVL (compulsory liquidation involves a Court hearing and Official Receiver investigation) but produces the same outcome — the company is wound up and the director is freed from continuing obligations.

• ›Drawing further on the company’s credit (bank, supplier, HMRC) to fund the liquidation — this is wrongful trading. Section 214 IA 1986 makes directors personally liable for losses caused by continued trading after the point at which insolvent liquidation became inevitable.
• ›Selling assets at undervalue to a connected party to extract value before liquidation — this is a transaction at undervalue under section 238 IA 1986 and a misfeasance under section 212. The liquidator will unwind the transaction.

The cost of not liquidating — continuing to trade insolvent, accumulating HMRC debt, exposing the director personally to wrongful trading and disqualification — is materially worse than the cost of liquidation. Funding is almost always available; failing to liquidate is usually the more expensive route.

At IQ Insolvency, we work with directors on funding routes. The initial consultation is free — we don’t charge for the assessment and we don’t pressure directors into immediate engagement. If funding is uncertain, we discuss options honestly. Where redundancy claims are the funding source, we explain the process and timing. Where director personal funding is the source, we agree the timing alongside the engagement letter.

For the fee framework, see How much does a CVL cost?. For the broader procedure, see Liquidation timeline. For director protection against wrongful trading exposure during this period, see Director duties in financial difficulty.