May 19, 2024

What Are the Liquidation Fees?

The liquidation fees paid to the insolvency practitioner appointed to oversee the winding up of your company are a reflection of their expertise, time and effort involved in the process. They are based on the size of your company, amount of assets it has and the complexity of its winding-up needs.

The cost of liquidation varies depending on the method used. There are two main procedures – Members’ Voluntary Liquidations (MVL) and Creditors’ Voluntary Liquidations (CVL). Both provide the same end result – that the remaining assets of the company will be used to pay creditors – but each has its own fee structure, which is affected by the amount of debt owed to creditors.

As a general rule, the liquidator will assess your company’s assets and value them before realising these funds for the benefit of outstanding creditors. The costs associated with locating and valuing these assets will be included in the liquidation fees.

Unveiling Liquidation Fees: What You Need to Know Before Proceeding

You will also need to determine your company’s liabilities, including secured debts, unsecured debts and accounts payable. The net estimated liquidation value will be calculated by deducting the company’s liabilities from its adjusted tangible asset values, taking into consideration a number of factors, including the severity of your business’s financial distress (e.g. higher discounts for dire scenarios) and the nature of your assets (e.g. commodities tend to sell at lower discounts than specialized equipment).

You should be aware that the liquidation fees you need to pay may not cover all of the expenses the liquidator incurs in carrying out their duties, such as staff costs and advertising of asset sales. If this is the case, you will need to either fund these costs from your own personal finances or negotiate a fee arrangement with the liquidator that covers these additional expenses.

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