Different Ways You Can Close a Company
There’s more than one way to shut down a limited company, and the right route depends on your circumstances and whether the business has debts it can’t pay.
Close Company
Closing down a company can feel like a lot to get your head around, especially if it wasn’t something you planned for. But with the right advice and a clear idea of your options, the process will be easier to manage and understand.
Voluntary strike-off (also called dissolution)
If your company is no longer trading and doesn’t owe anything, you might be able to apply for a voluntary strike-off through Companies House. It’s a simple and low-cost option, but it’s important to follow the correct steps to avoid any issues later on.
Members’ Voluntary Liquidation (MVL)
To close a company with an it must MVL be solvent, meaning it can pay debts when they fall due. It is a tax-efficient and quicker process, but the company must have been trading for at least two years and have over £25,000 in retained profits. Once liquidated, the remaining funds are fairly distributed across the shareholders.
Creditors’ Voluntary Liquidation (CVL)
A CVL is a common way for Directors to voluntarily close a company that cannot pay its debts. The liquidator eases the financial pressures and takes control of the company assets to distribute funds to your creditors fairly.
Compulsory Liquidation
If your creditors take legal action due to unpaid debts, the court may force your company into a Compulsory Liquidation. This is the most serious way a business can be closed, and it can be avoided by speaking to a liquidation expert as soon as you notice the company is insolvent.
What happens when you close a limited company?
An exact company liquidation process will vary based on the company’s financial situation, but there are key steps you can expect a liquidator to follow, which include:
- The Company Stops Trading – The business must stop trading before a close company process can begin.
- Pay Remaining Debts – Your liquidator will take over settling any outstanding debts the company might have.
- Inform HMRC and Companies House – Both have to be notified. Our liquidation team handles all formal filings, including advertisements in The Gazette.
- Distribute or Sell Assets – How assets are handled depends on whether the company is solvent or insolvent. Assets are sold, and the liquidation company distributes funds to creditors or the Company Directors.
- Close Business Accounts – Bank accounts will be settled and closed.
- Final Accounts and Tax Filings – The company’s final accounts are prepared and submitted.
- Dissolution and Removal from Companies House – The liquidator formally closes and removes the company from the register.
What are the responsibilities of a Director closing a company in the UK?
If you’re a Director in the UK, you have a legal responsibility to act in the best interest of your creditors. When the company becomes insolvent, you must stop trading and make no further payments to any creditors. The appointed liquidator will assess and arrange to settle debts on your behalf, as making payments yourself can result in the accusation of preferential payments.
Throughout the liquidation process, Directors are responsible for assisting the liquidator by giving them quick access to accounts and any necessary financial documents. Cooperation will help them close your company and distribute funds without disruption.
How much does it cost to close a limited company?
The cost of closing your company will depend on whether it is solvent or insolvent. If debts can be paid, we can close your company with a Members’ Voluntary Liquidation and Directors will benefit from a 14% Business Asset Disposal Relief tax rate.
If your company has outstanding debts and no funds to clear them, we can support the business closure through a Creditors’ Voluntary Liquidation (CVL). The cost of a CVL starts at approximately £3,000 + VAT.
What if you can’t pay the costs to close your company?
If you’re worried about paying the cost of the liquidation or settling debts with creditors, please do not let this delay your decision. Our team are experts in handling company closures and can advise you on the best route for funding, including valuing and selling company assets to release funds.
How the liquidation centre can help you close your company
The Liquidation Centre can help you close down your solvent or insolvent limited company in as little as ten days. Whether you want to release funds tied up for retirement or finally release yourself from creditor pressure, speak with us today so we can help you confidently move forward.