ESG Clarity Asia blog Cost of Liquidation of a Company

Cost of Liquidation of a Company

The cost of liquidation of a company can vary wildly and is often based on how complex the process is, how many assets need to be valued, and whether the case requires any specialist legal or accounting expertise. However, there are some fixed costs involved in the process that are a matter of law and cannot be avoided.

The main cost is the liquidator’s fees. These are paid from the value of assets realised in the process. As such, creditors have a direct interest in the amount of liquidation fees as it directly affects the amount of debt payments they receive.

Other costs include transaction investigation costs (the liquidator is required to investigate transactions that took place in the lead up to liquidation) and asset valuation and realisation costs. In addition, the liquidator will have to attend meetings with creditors and prepare a Statement of Affairs which outlines their findings in detail.

Calculating the Cost: What Determines the Cost of Liquidation of a Company

If the company has any employees, then the liquidator is also responsible for making redundancy payments to them. Finally, the liquidator may be required to advertise their appointment as well as pay for storing the company’s records. In some cases, directors who are owed overdrawn director’s loans can claim these payments back to help cover the costs of liquidation. If you’re unsure about this, then the appointed insolvency practitioner will be able to discuss it with you in more detail. Alternatively, directors can use their funds to pay for the liquidation of the company. This is rarely a favourable option and should only be considered if the directors have sufficient personal assets to cover the costs of a liquidation.

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