How to Close Down a Limited Company
Forming a company is a simple enough process and one you can complete in just a couple of hours. However, closing a business can be a different matter entirely without professional help.
The starting point when closing your company is whether the business is solvent (can pay it’s debts) or insolvent (cannot pay its debts). The options and processes are very different depending on this. It’s not always clear what the answer is and we can help you get a clearer picture as well as provide an experienced company closure service, including liquidation via our Insolvency Practitioners.
Process for Closing a Company
HMRC’s page on the regulations is here.
There are different processes for closing a company depending on which is the best or available option for you, which starts with whether your company is solvent or insolvent.
Practical Steps Needed for All types of Company Closures
In addition to the formal processes needed to close a limited company business, there will be a number of other actions needed, including some, if not all of the following :
- Paying staff or making employees redundant.
- Ceasing trading
- Advising any creditors and suppliers that the business has ceased trading
- Sale of company assets
- Terminating contracts for utilities and notifying other providers such as the Council
- Preparation of the final company accounts and tax returns and paying any sums due
- Notify HMRC in relation to payroll, VAT, if applicable and any other taxes that may apply to your business
- Closing the company bank accounts
Closing an Insolvent Company
If your company has debts or is insolvent, you cannot liquidate the company yourself. In order to ensure fair play for creditors, Insolvency Practitioners are the only ones who can do this. They will likely recommend you a creditors voluntary liquidation, as the appropriate method.
If the above applies to you, please do get in contact. Our team of experienced Insolvency Practitioners help hundreds of small business clients like you close their companies down each year.
How to Close an Insolvent Company With Debts
If you want to shut down your business where it is unable to pay its bills, you will need to initiate a creditors voluntary liquidation. A director of a company can propose a creditors voluntary liquidation if:
The company must also hold a creditors’ meeting within 14 days of passing the resolution. Creditors must be given at least 7 days notice of the meeting, which must also be advertised in the Gazette. A Statement of Affairs must be presented to creditors during the meeting which summarises the company’s assets and liabilities. A summary should also be given to the liquidator.
When all assets have been converted into cash and creditors repaid in order of priority, the company will be struck off 3 months after the liquidator has held a final meeting.
Be careful to check for an overdrawn directors’ loan account as this can be quite serious once a company has become insolvent.
Closing a Solvent Company
For solvent companies with assets who want to close a company in a tax efficient manner, a members voluntary liquidation is often the right choice.
A second option, which is the quickest and cheapest, where a company hasn’t traded in at least 3 months, is a process known as strike off, or dissolution. This method involves completing some forms, paying a small fee and notifying Company’s House that you wish to have it removed from their official register. This is the only method which doesn’t involve a requirement for an Insolvency Practitioner.
If you want peace of mind and to avoid hassle, please do call us, use the live chat or fill in the contact form. We’ve got you covered as 1 of the UK’s leading company closure services.
Closing a Solvent Limited Company by Dissolution
If you have the option to close your company when it has assets and no debts, this is known as dissolving or striking it off. You must apply to Companies House to have it voluntarily wound-up and struck off the register. You can only have your company struck off the Companies Registrar if:
- Your company hasn’t traded or sold any stock in the last 3 months
- Hasn’t changed names in the last 3 months
- Isn’t threatened with liquidation
- Has no agreements with creditors, e.g. a company voluntary arrangement
- There are no existing debts
If your company doesn’t satisfy the above conditions, you will have to voluntarily liquidate the business instead.
Closing a Solvent Company via Members Voluntary Liquidation
If your company is solvent with assets, you can close the business using a members’ voluntary liquidation. This may be appropriate if:
• Company Directors Wish to Retire
• You wish to step down from a family business and no one else wants to run it
• You want to pursue another career path
• You want to release assets/cash from the company tax efficiently
Close Company which is Dormant or Never Traded
If the company is dormant or never traded, closing the company should be straightforward using the dissolution method. Once the directors have agreed, submit the application for Strike Off using form DS01. After it’s been advertised in the Gazette, and waited out the mandatory 3 month objection period it will be struck off the register and cease to legally exist.
Dissolution or striking off is only lawful if the business is solvent and has no debts. If you attempt to strike off your company with outstanding debts to HMRC or another creditor, 1 or more of those creditors will likely raise an a formal objection which will likely result in Companies House rejecting your application to dissolve.
How Much Does it Cost to Close a Business?
The amount it costs to close your business will depend on thelegal process. If you are able to dissolve your business, submitting a DS01 form to Companies House to close a company, where possible, comes with a mere £10 filing fee and you may choose to do this yourself. All other options are far more expensive as Insolvency Practitioners will have to be involved and fees will generally be from around £5,000.00 and upwards. You canread our full article here on The Costs of Closing a Limited Company.
Will Closing a Company Affect the Director Personally?
As long as the director has not behaved improperly, the closure will have no impact on any future business activities.
Can I Close a Company and Start a New One?
The answer is that you can start another business providing all the requirements of Companies House are adhered to.
What HMRC is keen to prevent, however, is the process known as phoenixing, whereby a liquidated company rises from the ashes with the same or similar name, but within a new limited company structure.
This is prohibited by Section 216 of the Insolvency Act.
You can’t for example, use the same company name again.
How Long Does it Take to Close a Company?
Assuming the company is simply being struck off the register at Companies House, expect a time frame of around 3 months before you receive confirmation.
Liquidation is likely to take much longer, especially if there are assets to dispose of.
Get in touch if you Would Like Our Help With Closing Your Limited Company
If you want help liquidating your company voluntarily, or fear you will be handed a winding-up petition by a secured creditor or HMRC, you should contact Company Debt at your earliest opportunity.
We can put the provisions in place to help you wind up your business seamlessly or act quickly to help you avoid a compulsory liquidation.
Company Closure FAQs
The legal requirements for closing a company in the UK depend on the company’s specific circumstances but typically involve informing Companies House and HMRC, settling any outstanding debts, and distributing any remaining assets to shareholders. If the company has debt and needs to be liquidated, there is a legal requirement to use a licensed insolvency practitioner.
Can I close my company if it has outstanding debts?
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.