Insolvency fees

[stuk2023]

Our LTD is cashflow insolvent. We have minimal debts (c 5K VAT, 1K PAYE - both on payment plans, c2K suppliers) but sales and overheads being where they are mean our only option is insolvency. We also want out in general.

An insolvency practitioner we spoke with advises fees of £7.5K, most of which they say would come through the sale of assets. When I asked what would happen if the sale of assets left a shortfall, they indicated the directors would be liable. We're unable to personally finance that. I thought Dirs were protected in such instances?

What are our options, if we want to fold the business? It seems crazy that it's insolvent but we can't even afford to liquidate it.

 

[ChrisCallaghan]

That is a bit on the high side. I'd be in the ball park of £4,000 + VAT for your case.

However, given the minimal debts, you may wish to consider the alternative outlined in the below thread:

CLOSING A LIMITED COMPANY WTH INSUFFICIENT FUNDS WITH WHICH TO PAY AN INSOLVENCY PRACTITIONER

CLOSING AN INSOLVENT LIMITED COMPANY WITH INSUFFICIENT FUNDS WITH WHICH TO PAY AN INSOLVENCY PRACTITIONER If a company is unable to carry on trading due to becoming insolvent the standard procedure for closing it down is for the directors to appoint an Insolvency Practitioner to liquidate it...

www.ukbusinessforums.co.uk

 

[Lisa Thomas]

It sounds like the particular IP's you spoke to want to charge a higher fee than the company can afford and want you to personally guarantee/stump up to pay the difference.

How much are the assets worth?

Are there any overdrawn director loan accounts owing?

 

[UK Contractor Accountant]

they indicated the directors would be liable

well they cant make you pay unless you sign a guarantee.

As Chris's post above states £4K + VAT seems to be the ball park figure for insolvent company with minimal assets and few creditors (<30 say).

You may be entitled to Redundancy Pay claim from Government's PO (Redundancy Payment Office) which Directors sometimes use to help fund a CVL.

 

[UK Contractor Accountant]

Out of interest do any of the Liquidator Firms posting on on here or generally have a fixed fee structure for a CVL?

Like the Basic, Standard and Advanced fixed fee structuring rather than traditional timesheet/charge out rate structure where even the tea/boy girl puts time down to the case ('im joking) .

 

[ChrisCallaghan]

Out of interest do any of the Liquidator Firms posting on on here or generally have a fixed fee structure for a CVL?

Like the Basic, Standard and Advanced fixed fee structuring rather than traditional timesheet/charge out rate structure where even the tea/boy girl puts time down to the case ('im joking) .

Our fees are all very similar in allowable charge out rates, based on role etc, but the reality is that we often charge a fixed rate for liquidations, especially where the director is funding our fee personally. The firm I work for will charge a fixed rate, based on the amount of work and creditors involved. What this rate is will vary, depending on work levels and competition within the market.

Though I've mentioned a price here, I don't typically list prices for basic CVLs on UKBF, but the quote OP got of £7.5k just seemed so high for the work involved, based on OP's post!

 

[Lisa Thomas]

Out of interest do any of the Liquidator Firms posting on on here or generally have a fixed fee structure for a CVL?

Like the Basic, Standard and Advanced fixed fee structuring rather than traditional timesheet/charge out rate structure where even the tea/boy girl puts time down to the case ('im joking) .

Liquidations are a two staged process. The pre liquidation stage, where the IP helps the directors place the company into liquidation. I tend to charge an average fixed fee of £5k plus VAT plus expenses for this stage.

The second stage is the post appointment stage. My firm charges on a time spent basis, which is the same in the majority of firms. Each case is different and therefore the amount of time spent will be different on every case. Base costs usuaully ranges from £10,000 plus VAT upwards.

Those costs are approved by the creditors (or the court) prior to drawing from the company's assets.

If there are insufficient assets available we have to write the shortfall off, which happens often.

In a case where there are insufficient assets to cover our costs and the director wishes to pay for them personally (they are NOT obligated to do so) I will cap my total fees and often let directors pay them in instalment's so they can get some breathing space and time to find the funds. My current cap is £6k plus VAT. The VAT is often recoverable.

To compare with a compulsory liquidation - The current costs are c£3k which the company or directors will need to find up front. The Official Receiver/Liquidator's costs will then start off at c£10k (to include a £6k secretary of state fee). Again these are paid from the assets, if available.

 

[Elliot Green]

Out of interest do any of the Liquidator Firms posting on on here or generally have a fixed fee structure for a CVL?

Like the Basic, Standard and Advanced fixed fee structuring rather than traditional timesheet/charge out rate structure where even the tea/boy girl puts time down to the case ('im joking) .

I think you will find some liquidators will have a fixed fee structure for both pre and post parts. We can work something out. When there are no assets, few investigations issues and few creditors, then it is not uncommon to charge as @Chris Callaghan has suggested. In such a case the pre-fee say of a figure in the order of £4,000 might be the total sum because without assets it is axiomatic the post-appointment fees cannot be recovered from the company. Without a PG from the directors for the post-appointment fees, even when approved by creditor resolution (as is the norm), if there is no hay there is no pay.