Need a Liquidation but Can’t Pay the Fee?
In the hundreds of calls we take each month through our advisory hotline, the most common conversation we have is “I need a liquidation, but I can’t afford the fee, what can I do?”.
Liquidation is an involved process. A straight forward liquidation is at least six months worth of professional work for an efficient firm like Dissolve to complete. The price necessary to cover those costs is often out of the reach of a small business owner who has already put everything they have into saving their business.
Here are some suggestions if you find yourself in those circumstances:
Sell an Asset for Fair Value
Some callers are surprised to hear that even if the company is insolvent, there’s nothing to stop you from selling a company asset for fair value prior to appointing a liquidator. The transaction is going to come under scrutiny from the liquidator, so make sure it is properly documented, and some thought has gone into the value calculation.
Using the proceeds of sale to pay the liquidation fee is not a preferential payment.
If the company is owed money, we always advise doing what you can to try to collect it prior to commencing a liquidation. We find debtors are generally unwilling to pay once they know the company is in liquidation. Again anything you collect can go towards the liquidation fee.
Lend the money to the company
Sometimes the company has assets or debtors that can only be realised after commencing liquidation. In this case we can do a deal where if you put the funds forward for the fee, and we recover the same amount (or more) from debtors or assets, we will reimburse your contribution.
If you can’t cover wages, keep in mind getting the company into liquidation will trigger the Government’s Fair Entitlement Guarantee (FEG) scheme. The FEG scheme will pay employee wages and entitlements when the company can’t (some limits apply check the government’s website).
If none of the above apply, simply cease the company from trading and leave it dormant. One of the company’s creditors might go to court to put the company into liquidation. You lose control over when (or if) it happens so it’s not the ideal option, but you do get the company into liquidation without having to pay.
If you have any questions give us a call, as always we offer 30 minutes of Confidential Free Advice.