What If I Can’t Afford A Liquidation?

You might already be struggling to pay wages, rent, suppliers or HMRC. Finding the money for a liquidation fee can feel impossible and many directors assume this means they must put off taking action until they can afford it. But insolvent companies can be liquidated even when there are no assets left. The key is to understand how the process works, what your responsibilities are and what support is available.

Why does liquidation have a cost?

Liquidation is a formal legal process. It isn’t an administrative closure and it isn’t something that can be done without a licensed insolvency practitioner. The insolvency practitioner becomes the liquidator, takes control of the company and carries out statutory duties including:

Identifying and realising company assets
Communicating with creditors and managing their claims
Filing statutory notices and reports
Investigating director conduct, which is a legal requirement
Bringing the company to a compliant close

These activities are set out in liquidation regulations and must be completed regardless of the size of the business or the number of assets it has. This is why liquidation always carries professional costs.

There is no such thing as free liquidation, even if some companies advertise low fees.

However, that doesn’t mean liquidation is unaffordable. There are structured options for companies with little or no remaining assets. These exist to help directors meet their duties and close the company responsibly.

Why you shouldn’t delay liquidation

If a company is insolvent and can’t afford a liquidation, many directors wait and hope things improve or that creditors stop chasing. Unfortunately this usually increases risk of creditors taking further action, such as issuing a statutory demand.

Once a company becomes insolvent, directors must put creditor interests first. Continuing to trade or allowing debts to increase can lead to allegations of wrongful trading or, in more serious cases, being held personally liable for company debt.

Delaying action often results in:

Pressure from HMRC or lenders escalating into legal action
Winding-up petitions, which force the company into Compulsory Liquidation
Loss of control over timing, outcome and costs

Acting early means you can choose a voluntary route and work with an insolvency practitioner of your choice, instead of having the process forced upon you by a creditor like HMRC.

What if the company has no assets to pay for liquidation?

This is common. Many directors reach out when:

Stock and equipment have already been sold to keep the business going
Cash reserves are gone
Loan funds have been spent
HMRC arrears are growing
There’s nothing left to contribute towards professional fees

A reputable insolvency practitioner will never expect directors to fund a liquidation the company genuinely cannot afford.

What is a liquidation?

Liquidation allows directors to close an insolvent company safely with the support of a licensed insolvency practitioner, even where the business has:

No physical assets
No remaining cash
No receivables left to collect
No ability to contribute funds

The process is a formal one led by a regulated professional and involves the same legal protections. It can take into account the absence of assets while providing a clear route forward for companies that are insolvent.

Why a liquidation is safer than trying alternatives

When a company cannot afford a liquidation, directors sometimes try other, cheaper routes such as trying to dissolve the company through a strike off. The problem is that strike off is not allowed when you owe creditors. HMRC, lenders, landlords and suppliers can (and do) object, and the company can be restored later so creditors can pursue the debts.

More importantly, dissolution does not stop director investigations. The Insolvency Service can still investigate dissolved companies and pursue disqualification if they believe misconduct has taken place. A liquidation avoids these issues because it follows a statutory path and ensures everything is done correctly.

A liquidation therefore provides:

A regulated process that protects directors
A formal investigation that closes off future risks
Certainty that the company will not be restored
Clear communication with all creditors
A lawful way to write off unsecured debts

What happens to company debts in a liquidation?

In most voluntary liquidations, any unsecured debts are written off. That includes:

Trade suppliers
Leases and rental arrears
Bank loans without personal guarantees
Bounce Back Loans, unless misused
HMRC debts, unless wrongdoing is proven

Limited liability remains one of the strongest protections for directors, provided you’ve acted within your duties.

A personal guarantee, overdrawn director’s loan account and evidence of misconduct can lead to personal exposure. But these issues are reviewed case by case and explained clearly at the outset.

What if HMRC is your main creditor?

HMRC is often the largest creditor in insolvent businesses. Pressure tends to escalate quickly once tax arrears build up. A liquidation deals with HMRC debts formally, notifying the right departments and ensuring you’re no longer dealing with enforcement threats, penalties or demands. HMRC debt can be written off in liquidation unless there has been deliberate wrongdoing.

When you should consider a liquidation

A liquidation may be right for you if:

The business has stopped trading
There are no remaining assets to realise
There is creditor pressure you can’t resolve
HMRC debts are escalating
The company has no ability to fund a standard liquidation
You want to draw a line under debts professionally and legally

Speaking to a qualified insolvency practitioner will confirm whether this route fits your circumstances.

Key takeaways: What if I can’t afford a liquidation?

You can still liquidate an insolvent company even if it has no assets, using a regulated no-asset liquidation route
A no-asset liquidation gives you a compliant way to close the business when you can’t fund a standard CVL
Acting early prevents creditors, including HMRC, from escalating to enforcement or winding-up action
Most directors are protected by limited liability and unsecured debts are usually written off unless misconduct is found
Strike off isn’t safe when you have debts, as creditors can block it or restore the company to pursue you
Director conduct reviews are routine in all liquidations and usually close with no further action
Early advice from a qualified insolvency practitioner helps you stay compliant and choose the safest route forward

Get advice on whether you can afford a liquidation

If you believe you can’t afford a liquidation, that’s usually the clearest sign that the company is insolvent and needs immediate guidance. You don’t need assets or cash reserves to take action. The important thing is that you don’t need to wait for things to deteriorate further.

We offer a dedicated No Asset Liquidation service that gives directors a regulated, affordable way to close an insolvent company properly. You’ll speak directly with a qualified insolvency practitioner, get clear guidance on your options and understand your responsibilities from the outset.

Call 0800 054 6580

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