Winding Up a Company Advice – How to Wind Up a Limited Company
The term ‘winding up a company’ is often used in multiple insolvency situations and can be referred to when addressing several types of liquidation, however, it is more commonly used when a creditor such as HMRC is initiating the process of compulsory liquidation, with the aim of debt recovery. One of the ways it may do this is by sending you a winding up petition. The alternative to this would be where a director wants to close the company him or herself and remain in control. When considering winding up a business in the UK you should first establish whether your company is solvent or insolvent. Have a look at our ‘What is Insolvency’ page to find out.
How to Wind Up a Company that is Insolvent
If your company is insolvent and cannot afford to pay the bills on time then you may want to consider a creditors’ voluntary liquidation (CVL) for your company. As a limited company is a legal entity in itself, the debts belong to the limited company and not to the officers (directors) of the company unless personal guarantees have been signed. Liquidating an insolvent company where personal guarantees have not been signed allows the remaining debts to be liquidated along with the company once it has finally been struck off the company register.
More often than not, however, a director will seek help when a creditor is threatening the company and the bulk of this section will address these scenarios. Generally, there are two different but relevant types of insolvent liquidation and they are:
When closing a company via a CVL the directors can leave themselves open to serious consequences if they make the wrong decision or continue to trade on too long. If you wish to speak to a specialist who can help you with a CVL and with winding up a limited company voluntarily call 08000 746 757; alternatively email firstname.lastname@example.org to access our company winding up services.
Compulsory Liquidation of an Insolvent Company with a ‘Winding Up Petition’
Company liquidation takes a more serious turn if, instead of opting to carry out a CVL yourself, you have instead received a compulsory winding up petition against your company. If you have received a winding up petition or a winding up order then please seek advice immediately. A winding up petition means that a creditor is trying to force your company into a compulsory liquidation and you will lose total control of your company once the Official Receiver has been appointed. In fact, the director(s) will start to lose control as soon as the winding up petition is advertised in the Government’s Insolvency Register (The Gazette). At this point the company bank account will very likely be frozen and company assets cannot be moved or sold, therefore we strongly recommend seeking help when threatened with a winding up petition. It is worth remembering that one of your creditors has taken the time, trouble and expense to discover how to wind up a limited company.
The company liquidation will be forced via the winding up petition presented to the court and will end in a winding up order and subsequent compulsory liquidation of the company. A compulsory liquidation of the company must be avoided in the vast majority of cases due to the inherent risks involved to the director. The director has a legal duty to close the company appropriately (for example, a CVL would be regarded as appropriate) whereas a compulsory winding up of the company is forcing the director/s to address the company’s insolvent situation so will be investigated by the official receiver. Statistically a director is more likely to receive director disqualification via a compulsory liquidation. This can have serious consequences as creditors can seek compensation from disqualified directors.
We are very experienced at fighting winding up petitions and HMRC negotiations and we have been successful in doing so. In the majority of cases we can usually rescue the business or agree an arrangement with HMRC for substantial* tax debts.
Knowing who to trust can be difficult when considering winding up a limited company so make sure you read through our testimonials page. If necessary, we can also arrange for you to speak with some of our previous clients as further testament to the quality of our company winding up services.
How to Wind Up a Company that is Solvent
If your limited company is solvent and you wish to liquidate it then you should consider a Members’ Voluntary Liquidation (MVL). This is relevant when winding up a company, as long as it does not have any debts (a declaration must be signed verifying this fact). Provided there is more than £25,000 in net assets in the company you may go ahead with an MVL but the process can only be completed by an insolvency practitioner not an accountant. We have specialist insolvency practitioners and tax consultants who can provide appropriate tax advice on a MVL and the tax can often be reduced to 10%.
Below the £25,000 net asset figure your accountant can close the company.
You can complete the process yourself as a director by applying to Companies House to have the company removed from the register and dissolved. The process can take 3-4 months and you must follow the process carefully; have no debts and your accounts up to date (or HMRC will automatically object to your application).
More Questions About Winding Up a Company?
Prefer to talk? Speak with one of our specialist team members today on 08000 746 757 to learn more about winding up a company, or alternatively use the live support facility at the bottom of the page to get an answer fast. Alternatively, you can contact senior turnaround practitioner Mike Smith on 07912 344 394.
Written By: Mike Smith