There are any number of reasons why the life of a company has to come to an end ranging from insolvency through to having served its purpose and no longer being required. Whatever the reason, there are a series of processes to follow to close or dissolve a limited company.
Reasons for closing a company
The reason that you are choosing to close the company is part of the process as to how you can dissolve it. Therefore, understanding the reason will help any agents you use in the process understand what method needs to be used to close down your company.
If the company is solvent
If a company is financially secure and can pay its bills, it is termed as solvent. This means if you want to, you can apply for the company to be struck off the Register of Companies held at Companies House. Alternatively, you can start a member’s voluntary liquidation. These are the cheapest two ways to close down a company.
Striking off the public register
To have a company struck off the register, it must first comply with a number of requirements. These include:
- It has traded or sold any stock in the previous three months
- There have been no changes of company name in the last three months
- There is no threat of liquidation
- There are no agreements in place with creditors such as a Company Voluntary Arrangement (CVA)
Next you must apply to legally close down the company. To do this, you must announce your plans to anyone involved as well as to HMRC. Any employees must be treated according to current employment laws and any business assets and accounts must be handled correctly. People to be informed include members or shareholders, creditors, employees, managers of any employee pension fund and any directors not already having signed the application.You are also obliged to send your final accounts to HMRC and a Company Tax Return form but this doesn’t need to be filed with Companies House. All documents must be retained for 7 years after the business is closed.To strike off the business, you complete the form DS01 with Companies House. This must be signed by the majority of the company directors and all assets should have been dealt with before the form is completed. There is a charge of £10 to do this and you will receive confirmation that the process is complete, usually two months after notice is filed.
If the company is insolvent
If a company is in financial difficulty and cannot pay its bills, it is termed as insolvent and this where the company owns money to its creditors, whose interests come before those of shareholders or directors. In this case, you need to use the creditors’ voluntary liquidation process or the company may be forced into undertaking compulsory liquidation.To have a creditors voluntary liquidation of the company, a shareholders meeting is required and 75% of them (by value) must agree to pass a winding-up order. After this, the company must appoint an authorised insolvency practitioner as a liquidator to deal with all company assets. The liquidator will sell the business and send a copy of the resolution to Companies House within 15 days and advertise in The Gazette (The Official Public Record).
If the company has no director
If the company finds itself in the position where it has no director, say if the sole registered director has died, then the company may be struck off if they don’t appoint a new director to take their place. To do this, shareholders need to agree to appoint a new director and vote on it. If the sole director has died and there are no company shareholders, the executor of the estate can appoint someone to be the director, as long as this is catered for in the articles.
An option to think about when you first form a company is to create a dormant company. This is a company that isn’t actively trading at the present time. You can also make your company dormant if the company has stopped trading and is no longer carrying out any business activities or receiving any income. In this situation, although you will not be actively trading, the company will still be registered with Companies House and annual accounts and confirmation statements will still be required to be submitted on an annual basis. A company can remain dormant indefinitely if you wish.
Restoring a dissolved or struck off company
Once a company has been dissolved or struck off, this doesn’t have to mean that this is the absolute end for the company. You can restore a dissolved or struck off company as long the right paperwork is completed to do this. You can use a service to restore a dissolved or struck off company to undertake this process on your behalf and this will ensure it is done correctly. It usually taking around 4 to 6 weeks to complete. The process will include fees if there are any court proceedings to undertake as part of the process.