Dissolving a limited company involves striking it off the register at Companies House, after which it ceases to exist. Directors approaching retirement often choose this cost-effective way to close down their business, but because specific rules apply, it is advisable to follow a checklist of requirements.
During the three months prior to an application for dissolution, your company must not:
Any formal insolvency procedure pending or already in place will render the company ineligible for dissolution. This includes Company Voluntary Arrangements, administration orders, Creditors’ Voluntary Liquidation or Members’ Voluntary Liquidation processes.
As you can see, there is much to consider before dissolution can take place. Begbies Traynor offers support and guidance during this process, and operates from an extensive UK office network.
Within seven days, a copy of your application should be sent to members, employees, and any directors who have not signed the form. There is a requirement to let existing and prospective creditors know about your intentions, which might include suppliers, customers, HMRC, the bank and your landlord.
The Department of Work and Pensions may also be an interested party, along with the trustees of any employee pension fund associated with the company.
Creditors must sanction the dissolution within three months of notice being received, and without their permission it will not go ahead.
It is worth bearing in mind that should any inconsistency or irregularity of operations be discovered in the future, creditors and other interested parties can request the company’s restoration to the register. If this happens, your conduct as a director may be investigated.
Irregularities might include:
Any of these situations could lead to financial penalties being imposed. In the most serious cases, a prison sentence of up to seven years can be handed down by the courts.
Once all interested parties have been notified, a period of three months must elapse during which time creditors can make an objection. If this time passes without event, the company will be struck off the register and will no longer exist as an entity.
Three months is the minimum time for the dissolution process to complete, although if circumstances are complex it can take much longer than this. A fee of £10 must accompany application form DS01. An advert is then placed in your local Gazette, followed by the notice of company closure three months later.
If your company has been liquidated, the Insolvency Service may apply for its early dissolution if there are no assets and no investigation into director conduct. This saves time and money when the costs of winding up will not be covered by the sale of assets.
In this instance, the usual notifications are not issued. Creditors receive notice via a single form which serves as a financial report and a notice of closure. Objections can be made against this early dissolution if a creditor believes that directors have acted improperly, or if they are aware of the existence of other company assets not originally taken into account.
If a creditor has good reason to restore your company to the register, a court order will be needed, and the company will be treated as if dissolution had not taken place. This could happen if they were not informed, or believe that the business was insolvent on dissolution.
Begbies Traynor is the UK’s largest business recovery practice, and with an extensive UK office network we can arrange a same day consultation with one of our experts. Just contact our team to arrange your initial meeting free of charge.