If you have reached agreement with other directors and shareholders that the company should be closed, the manner in which this is achieved depends on whether the company is solvent or insolvent.
There are two ways in which to close a company with no debts – getting it struck off the Register of Companies through a process sometimes known as dissolution, or entering into a Members’ Voluntary Liquidation.
Specific eligibility criteria exist which must be met before a limited company can be struck off, including cessation of trading for three months.
There must be no threats of liquidation or formal creditor arrangements in place, such as a Company Voluntary Arrangement, and the company must not have changed its name during the previous three months.
There are certain procedures that need to be undertaken before the company is struck off:
Once all of the above has been completed, it is time to apply to Companies House to strike off the company. This is carried out using form DS01, which should be submitted along with the £10 application fee. If your application is accepted, a notice will be placed in your local Gazette, followed by another notice placed three months later to announce that the company has been dissolved.
This method of liquidating a company is often used when a sole director retires, or if there is nobody else willing to run the business. Alternatively, it may simply be the best route if the company serves no further purpose and shareholders are keen to extract the profits.
The first step in this procedure is to establish that the company is indeed solvent. A Declaration of Solvency will need to be signed to this effect. Once a winding up resolution has been passed, a liquidator will be appointed to administer the process.
Begbies Traynor are available for appointment as liquidators, and can guide you through the rules and regulations surrounding a Members’ Voluntary Liquidation.
Once appointed, the liquidator will send notice of the MVL to the Registrar of Companies, creditors, and the Gazette, prior to selling off any assets of business.
A final general meeting is called to present a formal account of the liquidation, which is then sent to the Registrar of Companies.
An alternative to closing down a limited company is to register it as dormant. This can be a good option if you want to trade again in the future, as the company will remain on the register at Companies House. Annual Returns are still required though, and you will need to file dormant accounts which include a balance sheet plus any relevant notes.
Similar to a Members’ Voluntary Liquidation in terms of the filing requirements and timescales, Creditors’ Voluntary Liquidation places the interests of suppliers and other creditors at the forefront of the procedure.
With the emphasis on realising maximal returns for creditors, the steps involved in this process include:
• Seeking advice from a professional Insolvency Practitioner. Begbies Traynor operate from an extensive network of offices, and are licensed to act as liquidators in CVL procedures
• Cessation of trading
• Calling a meeting of shareholders, 75% of whom (by value of shares) need to agree to a winding up resolution
• Calling a creditors’ meeting
• Placing all business paperwork in the hands of the liquidator, who will take over control of the company
• Selling business assets to pay off debts.
This involves one of your creditors petitioning through the court system for your company’s liquidation in order to recoup their monies. Creditors owed more than £750 can apply for a winding up order against your company, which will force your business into compulsory liquidation. This figure has increased to £10,000 as per the Government's temporary measures which will apply for the period 1 October 2021 to 31 March 2022.
As with all forms of liquidation, compulsory liquidation involves the appointed liquidator investigating the conduct of directors in the period leading up to the company's insolvency. If issues are uncovered, it could mean director disqualification, fines, or even a prison sentence in the most serious cases.
Begbies Traynor are licensed Insolvency Practitioners with more than 70 local offices. We are the UK’s number one corporate recovery firm, and are able to offer an initial consultation free of charge.
More Begbies Traynor Articles
Contact Begbies Traynor Group