Closing a Limited Company

Before applying for a strike off, ensure your company meets the following criteria:

• it hasn’t traded in the last three months
• it has no outstanding debts (including to HMRC, suppliers, and employees)
• it is not involved in any legal proceedings or threatened with liquidation.

Once eligibility is confirmed, you can apply to Companies House either online or by post, accompanied by a nominal fee.

The process of a voluntary strike off involves the following steps:

1. The directors must ensure that the company has ceased trading, has no assets or liabilities, and is not subject to any legal proceedings.
2. The directors must obtain the agreement of all shareholders to close the company.
3. Form DS01 (Application for Strike Off) must be completed and signed by a majority of the directors.
4. The form is submitted to Companies House along with the £10 filing fee.
5. A copy of the application must be sent to all interested parties, such as shareholders, creditors, and employees, within 7 days of submitting the form.
6. The company name is published in the Gazette, allowing 2 months for objections.
7. If no objections are received, the company is struck off the register and ceases to exist.

It’s important to note that a company can be restored to the register if an objection is received or if it is discovered that the company had outstanding assets or liabilities at the time of the strike off.

After your company is struck off, you must keep all business documents for 7 years. This includes bank statements, invoices, and receipts. If your company had employees, you must also keep employee records for the same period.

>>Read more about Objections to Company Strike Off

Striking off a company directly through Companies House is the least expensive option: It costs £8 to apply online, or £10 for a paper application.

To qualify for an MVL, a company must be solvent and able to settle all its debts within 12 months.

The process begins with the company’s shareholders passing a resolution for voluntary liquidation. Directors must then prepare and swear a Declaration of Solvency, which includes a detailed statement of the company’s assets and liabilities.

The process of a voluntary strike off involves the following steps:

1. The directors must ensure that the company has ceased trading, has no assets or liabilities, and is not subject to any legal proceedings.
2. The directors must obtain the agreement of all shareholders to close the company.
3. Form DS01 (Application for Strike Off) must be completed and signed by a majority of the directors^[3]Trusted Source – GOV.UK – Strike off a Company from the Register (DS01).
4. The form is submitted to Companies House along with the £10 filing fee.
5. A copy of the application must be sent to all interested parties, such as shareholders, creditors, and employees, within 7 days of submitting the form.
6. The company name is published in the Gazette, allowing 2 months for objections.
7. If no objections are received, the company is struck off the register and ceases to exist.

It’s important to note that a company can be restored to the register if an objection is received or if it is discovered that the company had outstanding assets or liabilities at the time of the strike off.

The tax benefit of an MVL comes through something called Business Asset Disposal Relief^[4]Trusted Source—GOV.UK—Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), which allows qualifying shareholders to pay a reduced Capital Gains Tax rate of 10% on the first £1 million of eligible gains (lifetime limit).

Fees typically start from £3,000 but can increase significantly depending on the size and complexity of the company.

The process of a Creditors’ Voluntary Liquidation (CVL) involves the following steps:

1. The directors must determine that the company is insolvent and unable to pay its debts.
2. A board meeting is held to discuss the company’s financial situation and propose liquidation.
3. Shareholders pass a special resolution to wind up the company and appoint a liquidator.
4. The directors must provide a statement of affairs to the liquidator, detailing the company’s assets and liabilities.
5. The liquidator calls a creditors’ meeting within 14 days of appointment, where creditors can vote on the liquidator’s appointment and discuss the statement of affairs.
6. The liquidator takes control of the company’s assets, realizes them, and distributes the proceeds to creditors in order of priority.
7. The liquidator investigates the company’s affairs and reports any misconduct to the appropriate authorities.
8. Once the liquidation process is complete, the liquidator calls a final meeting of creditors and members to present the account of the winding-up process.
9. The liquidator sends the final account to Companies House and the company is dissolved 3 months later.

The costs of Creditors’ Voluntary Liquidation (CVL) vary, with professional fees generally starting from £4,000 upwards, influenced by the company’s size, number of creditors, and asset disposition.

The process of Compulsory Liquidation involves the following steps:

1. A creditor, shareholder, or director petitions the court to wind up the company, usually due to insolvency.
2. The court hears the petition and, if satisfied, issues a winding-up order.
3. An official receiver (a government employee) is appointed to take control of the company’s assets and investigate its affairs.
4. The official receiver may appoint a private liquidator to assist with the liquidation process.
5. The liquidator takes control of the company’s assets, realizes them, and distributes the proceeds to creditors in order of priority.
6. The liquidator investigates the company’s affairs and reports any misconduct to the appropriate authorities.
7. The official receiver or liquidator may call meetings of creditors and contributories (shareholders) to discuss the progress of the liquidation.
8. Once the liquidation process is complete, the liquidator sends a final account to Companies House and the company is dissolved 3 months later.

In compulsory liquidation, the company does not directly bear the costs. The petitioning creditor covers the court fees. The Official Receiver’s fees and expenses are paid from the company’s assets, if available, or by the government, if the company lacks sufficient funds.

An insolvency practitioner is appointed as the administrator. Their role is to take control of the company and manage its affairs to protect the interests of the creditors. The administrator assesses the company’s situation and decides the best course of action, which could include restructuring, selling the business, or winding down operations.

Once a company enters administration, it gains a moratorium against legal actions from creditors. This provides a period of protection during which no legal action can be taken against the company without the court’s or the administrator’s permission, allowing some breathing space to formulate a plan.

If rescue or recovery is not viable, the administration process can lead to a more orderly closure of the company.

>>Read our full article on administration

Going into administration typically involves substantial costs, including the fees for appointing an insolvency practitioner, legal expenses, and any associated administrative costs. These costs are usually paid out of the company’s assets, which can reduce the amount available for distribution to creditors.

Yes, via a process called creditors voluntary liquidation, which is where the directors voluntarily opt to liquidate. The use of an insolvency practitioner is mandatory to ensure fair play for creditors.

To reinstate a company after closure, an application must be made to the court for a restoration order. This requires submitting evidence explaining why the company was dissolved and how you meet the criteria for restoration, as well as settling any outstanding debts or filing requirements.

When closing a company, directors must inform all creditors about the intended closure. This is usually done by sending a written notice and, if the company is being voluntarily wound up, advertising the resolution to wind up in The Gazette.

Failure to follow proper procedures during company closure can result in legal and financial penalties for directors, including personal liability for company debts, fines, or disqualification from serving as a director in the future.