Liquidations FAQ

Liquidations can be a complex subject, which is why we want to make things as simple as possible for you. As qualified Insolvency Practitioners and Chartered Tax Advisers (CTA) we have a wide range of experience in the most frequently used types of liquidation in Ireland, and want to use that experience to help you understand the process.

So, here are simplified answers to some of the most frequently asked questions when it comes to liquidations in Ireland. If you don’t find what you’re looking for here and want to arrange an obligation free conversation with an insolvency expert then you can schedule a call with us here.

Why is liquidation voluntary?

A liquidation is considered voluntary when the decision to wind up the company and sell its assets is made by the company's shareholders or owners, rather than being imposed by a court or other external authority. This means that the decision to liquidate is made by the people who have the most interest in the company, and who are best placed to decide whether it is in their best interests to continue operating or to wind up the company.

There are many reasons why a company may choose to liquidate voluntarily. These may include financial difficulties, such as a lack of profitability, excessive debt or an inability to meet financial obligations. Other reasons may include changes in the market or economic conditions, the retirement or departure of key personnel, a desire to focus on other business ventures or interests, or simply a decision to retire or move on to other activities.

By choosing to liquidate voluntarily, the company's shareholders or owners can take control of the process and ensure that the winding-up is carried out in a way that maximises the value of the company's assets and protects the interests of its creditors and shareholders. This can help to minimize the costs and risks associated with the liquidation process and allow the company to be wound up in a timely and orderly manner.

Is insolvency the same as liquidation?

No, insolvency and liquidation are not the same. Insolvency refers to a situation where a company is unable to pay its debts as they fall due and cannot trade its way out of those debts. Liquidation is the formal process by which a company is wound up and its assets are sold in order to pay its members and creditors.

How is the cost of a liquidation calculated?

The price of a liquidation depends on the type of assets, size of the company, number of employees, the level of cooperation from creditors and other stakeholders. The liquidator may charge an hourly rate, a fixed fee, or a percentage of the assets realized during the liquidation process.

Are liquidation costs tax deductible in Ireland?

For Capital Gains Tax, Yes. 

For Corporation Tax, No (Generally).

Corporation Tax

In general, expenses incurred in the course of carrying on a trade or business are deductible for tax purposes, provided they are incurred wholly and exclusively for the purposes of the trade or business. Since liquidators’ fees are generally a cost of closing the company, they're not wholly and exclusively for the purpose of the business and do not pass the central test of deductibility when considering general expenses. However, if the liquidator was to continue the trade of the business during the period of liquidation, liquidators’ fees incurred by a company while winding up its affairs may therefore be deductible. 

Capital Gains Tax

A liquidators’ expenses incurred in disposing of a company's assets may be tax-deductible if they were wholly and exclusively incurred for that purpose. Typically, a liquidator is a professional such as an accountant, who may charge fees for their services in that role. If it can be demonstrated that these fees, or a portion of them, were incurred wholly and exclusively in disposing of the company's assets, they may be considered an allowable deduction. If the actual expenditure on specific assets cannot be identified, a reasonable apportionment may be made.

It is important for companies and their advisers to carefully consider the tax implications of any liquidation, and to ensure that all relevant expenses are correctly classified and disclosed in their tax returns. Seek professional advice to ensure that the tax treatment of liquidation costs is correctly understood and applied in each case.

How long does a liquidation take?

The minimum statutory period is four months - this is to allow for calling of meetings and the dissolution period. However, the length of time that a liquidation process takes will depend on a number of factors, including the size and complexity of the company, the nature of its assets, and the level of cooperation from creditors and other stakeholders. Generally, a liquidation process can take several months to several years to complete.

Can a liquidators appointment be challenged?

Yes, in Ireland, the appointment of a liquidator can be challenged under certain circumstances.

If a creditor or member of the company believes that the liquidator has not been properly appointed, they may apply to the court to challenge the appointment. For example, they may argue that the appointment was not made in accordance with the company's articles of association or that the appointment was made without proper notice being given to all relevant parties.

Similarly, if a creditor or member believes that the liquidator is not acting in the best interests of the company, they may apply to the court to have the liquidator removed and replaced with someone else. Examples of situations where a liquidator's actions might be challenged include if they are not pursuing the most appropriate course of action for the company, or if they are not dealing with creditors in an appropriate or fair manner.

In both cases, the court will consider the evidence presented and make a decision on the matter. It is important to note, however, that challenging a liquidator's appointment or actions can be a complex and expensive process, and legal advice should be sought before taking any action.

Can liquidation be reversed?

Yes, Section 669 Companies Act 2014 allows for the annulment or a stay but once a company has entered into liquidation, it is generally very difficult to reverse the process. There may be circumstances in which a liquidation can be challenged or set aside, e.g. if the liquidation was commenced fraudulently or if there was some other serious procedural irregularity.