The short answer
If a company has no money, the liquidation is usually funded by a director contribution — the company cannot pay with funds it does not have. The fee is a personal payment by the director to the licensed insolvency practitioner, agreed up front. In some cases a director who was also an employee can claim statutory redundancy and other payments from the Redundancy Payments Service, which can help meet the cost.
It sounds like a paradox: how do you pay to liquidate a company that is broke? In practice it is common, and there are established ways to fund it. This guide explains who pays, why a director usually contributes, and how a director-employee redundancy claim can sometimes cover the bill.
Funding liquidation with no assets
- Usual funder A director contribution
- Why The company has no funds of its own
- Agreed Up front, before appointment
- Possible help Director-employee redundancy via the RPS
- Run by A licensed insolvency practitioner
- Wrong route Forcing a strike-off while owing money
Why the company can’t simply pay
An insolvent liquidation is funded from the company’s assets. Where there are none, there is nothing to draw the IP’s fee from. A director cannot lawfully conjure company money that does not exist, and an IP will not act without a clear, agreed source of funding. The practical answer in most no-asset cases is a director contribution — a personal payment to cover the fixed cost of a creditors’ voluntary liquidation.
The director-employee redundancy route
Many directors of small companies are also employees under a contract of employment, drawing a salary through PAYE. Where that genuine employment relationship exists, the director may be able to claim statutory redundancy pay, notice pay, holiday pay and arrears of wages from the Redundancy Payments Service (RPS) when the company is liquidated — just like any other employee. For some directors, that payout can be used to fund the liquidation fee.
- Genuine employment — a real contract, regular salary through PAYE, and proper working hours are needed.
- Statutory caps apply — redundancy and notice claims are subject to the weekly pay cap and length-of-service limits.
- Two years’ service — statutory redundancy pay generally requires at least two years of continuous employment.
| Funding source | How it works | Note |
|---|---|---|
| Director contribution | Personal payment to the IP | Most common in no-asset cases |
| Director-employee redundancy | Claim via the RPS | Only if genuine employment exists |
| Asset realisations | From any remaining assets | Used first where any exist |
Why a contribution is usually money well spent
It can feel counter-intuitive to put personal money into a failing company, but a director contribution buys something valuable: a clean, compliant closure handled by a licensed professional. The liquidator deals with creditors, including HMRC, takes the pressure off you, files the statutory reports, and brings the company to a proper end. The alternative — leaving the company dormant and hoping it is struck off — tends to drag on, invites creditor action, and can reflect poorly on directors in any later conduct review. Set against those risks, a modest contribution to fund a CVL is usually the cheaper and calmer outcome.
What you must not do
Paying yourself or favoured creditors out of the last remaining funds before liquidation can be a preference and may be unwound by the liquidator. Equally, continuing to trade and run up new debt once you know the company is insolvent risks wrongful trading and personal liability — see director personal liability. Take advice early; closing properly with a small contribution is far safer than letting matters drift.
No money left, but need to close the company properly?
A licensed insolvency practitioner can explain funding options, including any director redundancy claim, and the contribution needed. A confidential call costs nothing.
Frequently asked questions
How do you liquidate a company with no money?
Usually through a director contribution — a personal payment to the IP — because the company has no funds of its own. A director-employee redundancy claim can sometimes help fund it.
Can I claim redundancy as a director?
Possibly, if you were genuinely employed under a contract with a salary through PAYE and meet the qualifying conditions. The Redundancy Payments Service decides each claim.
Is it cheaper to let the company be struck off?
It can look cheaper but is not appropriate while the company owes money — HMRC or other creditors can object, restore it, or wind it up, costing more in the end.
Can I pay myself back before liquidating?
No — repaying yourself or selected creditors ahead of others can be a preference that the liquidator reverses, and may count against you in the conduct report.
Sources & further reading
- GOV.UK — Liquidate your limited company
- GOV.UK — Redundancy Payments Service / claim for redundancy
- Insolvency Act 1986 — preferences (s.239) and wrongful trading (s.214)
- The Insolvency Service — guidance for company directors
- ICAEW / IPA — licensed insolvency practitioner registers
This guide is general information, not formal insolvency advice. Your situation must be assessed by a licensed insolvency practitioner before you act.