Who Pays the Liquidator’s Fees in the UK if the Company Has Gone Bankrupt

1. Who Pays the Liquidator’s Fees in the UK if the Company Has Gone Bankrupt? Navigating the financial turmoil of a bankrupt company can be overwhelming, particularly when it comes to understanding the costs associated with liquidation. One common question is: who pays the liquidator’s fees if a company has gone bankrupt? Leading Business Services, one of the top insolvency practices in the UK, provides a clear and concise explanation of how these fees are managed. What is Liquidation? Liquidation is the process of winding up a company's affairs, selling off its assets, and using the proceeds to pay off creditors. In the UK, this process can be voluntary (Creditors' Voluntary Liquidation or CVL) or compulsory (court-ordered). A licensed insolvency practitioner, also known as a liquidator, oversees this process. Role of the Liquidator A liquidator’s primary responsibilities include: ● ● ● ● ● Realizing the company's assets Distributing the proceeds to creditors Investigating the company’s affairs and the conduct of its directors Ensuring all statutory obligations are met Given the complexities involved, liquidators charge fees for their services. But who exactly is responsible for paying these fees? Who Pays the Liquidator’s Fees? 1. Company’s Assets In most cases, the liquidator’s fees are paid from the company's assets. The liquidator will sell the company's assets, and the proceeds are used to cover the costs of the liquidation process, including the liquidator's fees. This is why it is crucial for the liquidator to maximize the value obtained from the company's assets. 2. Secured Creditors

2. Secured creditors, those who have charges over the company's assets, are paid first from the proceeds of asset sales. If there are any remaining funds after the secured creditors are paid, these funds are used to pay the liquidator's fees and other costs associated with the liquidation. 3. Insolvency Service Fees In compulsory liquidation cases, the Insolvency Service might cover some initial costs. However, these are usually recovered from the company’s assets once they are realized. If the assets are insufficient to cover all costs, the fees are prioritized according to statutory guidelines. 4. Directors’ Personal Liability In rare cases, directors may be held personally liable for the liquidator’s fees, especially if there is evidence of wrongful trading or fraudulent activities. This scenario is more common in situations where directors have continued trading while knowing the company was insolvent. 5. Creditors’ Agreement In a Creditors' Voluntary Liquidation (CVL), the creditors can agree to cover the liquidator’s fees if the company’s assets are insufficient. This agreement is usually reached during the creditors’ meeting where the liquidator is appointed. What If There Are Insufficient Assets? If the company’s assets are insufficient to cover the liquidator’s fees and other costs, the liquidator may seek alternative funding options, such as: Insolvency Practitioner Bond: Liquidators are required to have a bond, which can provide some financial coverage. Creditors’ Contributions: Creditors might be asked to contribute to the costs, especially if they want the liquidation to proceed to recover any remaining funds.

3. Government Assistance: In some cases, the government may step in to cover the costs, but this is typically a last resort. Leading Business Services: Your Partner in Liquidation Leading Business Services is one of the top five insolvency practices in the UK, designed to provide directors with a quick and simple solution to liquidate a company. Our team of authorized liquidators, accredited by the Insolvency Practitioners Association and the Institute of Chartered Accountants in England and Wales, ensures that the liquidation process is handled professionally and efficiently. We understand the complexities involved in liquidation and offer tailored advice to directors and stakeholders to navigate this challenging process. Whether dealing with voluntary or compulsory liquidation, our goal is to achieve the best possible outcome for all parties involved. Conclusion The responsibility for paying the liquidator’s fees in the UK primarily falls on the company’s assets. If these are insufficient, other mechanisms, including contributions from creditors or government assistance, may come into play. Leading Business Services is committed to providing clear, expert guidance through every step of the liquidation process, ensuring that directors and stakeholders are well-informed and supported during these challenging times. Understanding who pays the liquidator’s fees can help demystify part of the liquidation process and provide clarity for those involved in a company's financial distress. With Leading Business Services, you have a trusted partner to help navigate these complexities and find the best possible resolution.