What’s the best way to Close a Limited Company?

Forming a company is a simple enough process and one you can complete in just a couple of hours. However, closing or ‘dissolving’ a company can be a different matter entirely without professional help. Although there’s nothing like a bit of expert assistance to help you tie up all those loose ends, it is possible to dissolve your company yourself.

In this post, we will explore the different ways a limited company can be dissolved, including members’ voluntary liquidations, creditors’ voluntary liquidations and compulsory liquidations by your creditors or HMRC.

closing a limited company with debts

What does the law say about Closing a Company?

HMRC’s page on the regulations is here. The law differs depending on whether your company is solvent or insolvent.

Closing your Company via a Voluntary Winding-up

If you choose to wind up your limited company, 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 three months
• Hasn’t changed names in the last three months
• Isn’t threatened with liquidation
• Has no agreements with creditors, e.g. a company voluntary arrangement (CVA)

If you satisfy these conditions, you will be provided with a DS01 form to complete. This should be completed and filed with Companies House along with a £10 filing fee. You will also have to fulfil a number of obligations.

If your company doesn’t satisfy the above conditions, you will have to voluntarily liquidate the business instead.

Closing a Company via Members’ Voluntary Liquidation

If your company is solvent but does not meet the requirements listed above, you can liquidate the business using a members’ voluntary liquidation. This is appropriate if you want to:

• Retire
• Step down from a family business and no one else wants to run it
• Pursue another career path
• Release assets/cash from the company tax efficiently

How to dissolve a company which is Insolvent or has debt?

If you want to close a company that 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 can’t pay its debts
• Enough shareholders (75 percent by the value of shares) agree

To get the shareholders agreement to cease trading and liquidate the company you must call a shareholders meeting and ask them to vote. If 75 percent (by value of shares) agree, you must then:

• Appoint an authorised insolvency practitioner to liquidate the company
• Send the resolution to Companies House within 15 days
• Advertise the resolution in the Gazette

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 three months after the liquidator has held a final meeting.

Compulsory liquidation by creditors or HMRC

If your company is unable to pay its bills or reach an agreement with its creditors, they can choose to make an application to the court for a winding-up petition to bring the company to a close. At this point the company will be forced into liquidation, and any assets will be sold by the appointed liquidator to repay the company’s debts.

Get in touch

If you want help liquidating your company voluntarily, or fear you will be handed a winding-up petition by a secured creditor or the HMRC, you should contact Jameson Smith and Co. 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.

 

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