How to dissolve a company

Dissolving a company is the formal process of closing it down and removing it from the Companies House register. Once a company is dissolved, it legally ceases to exist.

Company dissolution is sometimes referred to as a company strike off, and it is one of the ways a limited company can be closed in the UK, but it is not suitable in every situation. If your company has debts that it cannot pay, dissolution is not an option and you will need to consider a formal insolvency process instead.

The first thing directors will need to do before they can dissolve a company in the UK is check that the company is eligible.

The company must meet the flowing criteria:

• Not have traded or sold off any stock within the last 3 months
• Not have changed its name within the last 3 months
• Not be subject to any legal proceedings
• Not be in any agreements with creditors, such as a Company Voluntary Arrangement (CVA)
• Have dealt with any outstanding debts and liabilities, including outstanding debt to HMRC
• Have dealt with all assets before applying

If the company meets these conditions, then directors must notify all relevant parties, including employees, creditors, shareholders, and HMRC within 7 days of submitting the DS01 application.

Process to Dissolve a Company

If your company is eligible, the process to dissolve a company is typically broken down into these 9 steps:

1. Firstly, directors should check that the company is eligible for voluntary strike off
2. All outstanding debts and liabilities should be settled
3. Directors must close company bank accounts and deal with any remaining assets
4. Any outstanding tax returns should be submitted and HMRC notified that the company is closing
5. Directors can then apply to strike off and dissolve a company by submitting the DS01 Form to Companies House, either online or by post, together with the relevant fee, £18 by post or £13 online
6. Within 7 days of submitting the application, directors must give a copy to employees, creditors, shareholders, and any other interested parties
7. Companies House will publish notice of the proposed strike off in The Gazette
8. Interested parties have two months to object
9. If no objections are received, Companies House will remove the company from the register and publish a final notice confirming the dissolution

How to Dissolve a Limited Company

To dissolve a limited company, directors must ensure all company affairs have been dealt with before submitting the application.

This includes:

• Paying employees and formally ending employment contracts
• Filing all outstanding tax returns
• Paying any tax liabilities
• Distributing or otherwise dealing with company assets
• Directors must also remember that within 7 days of submitting the application, a copy must be given to creditors and other interested parties

How to Dissolve a Company Online

Eligible companies can apply to strike off and dissolve a company by submitting a DS01 Form online through the Companies House website.

The online process requires directors to:

• Complete the DS01 application digitally
• Confirm that the company meets the eligibility criteria
• Pay the Companies House filing fee

In most cases dissolution applications can be submitted online. Companies House will acknowledge receipt and process the application from there.

How to Dissolve a Company on Companies House

A DS01 Form is the official application used to strike a company off the Companies House register. If the company has more than one director, the DS01 application must be approved and signed by the majority of directors before it can be submitted.

Once Companies House receives the application, it will review the information provided and publish a notice in The Gazette announcing the proposed dissolution. If no objections are raised within the statutory period of two months, the company will be struck off the register and dissolved.

A final notice will then be published in The Gazette confirming that the company has been dissolved and removed from the register.

How Much Does It Cost to Dissolve a Company?

The Companies House fee for voluntary strike off is currently:

• £13 if you apply online
• £18 if you apply by post

These are the only costs where directors manage the process themselves. If you require professional assistance to prepare the application, deal with tax matters, or ensure all affairs are properly concluded, additional costs may apply.

At the Liquidation Centre, we can advise on the most cost-effective way to close your company based on your circumstances.

Why Would a Company Be Dissolved?

Common reasons for dissolving a company include:

• The company has stopped trading and fulfilled its purpose
• The director is retiring or pursuing other opportunities
• The company was established for a specific project that has been completed
• The business has been restructured and the company is no longer required
• The company has been dormant for an extended period and the director wishes to formally close it

If your company is insolvent and needs to close, a Creditors’ Voluntary Liquidation (CVL) may be a more appropriate route. If you’re unsure on the best way to close your company, you should discuss your options with an insolvency practitioner.

How Long Does It Take to Dissolve a Company?

A company dissolution will typically take around two to three months from the date the DS01 application is submitted.

Before the process can be completed, Companies House must advertise the proposed strike off in The Gazette and allow a two-month period for objections.

There are certain circumstances where an objection could be raised by:

• HMRC
• Company Creditors
• Employees
• Other interested parties

If objections are received, the process may be delayed until the issue has been resolved.

What Happens When You Dissolve a Company?

When a company is dissolved, it will no longer exist as a legal entity and will be removed from the Companies House register. Following dissolution, the company can no longer trade, enter into new contracts or own any assets. 

It is important to note that if there are any assets remaining within the company at the time of dissolution, they will be passed to the Crown as bona vacantia. This is why all company assets should be distributed or dealt with before the application is submitted, as recovering assets after dissolution can be complicated and expensive.

Although dissolution is relatively straightforward, directors should be aware of several potential risks:

•  Directors who dissolve a company knowing there are outstanding debts can face disqualification of up to 15 years.

• Creditors can object to the strike-off application
• HMRC can object where tax returns or liabilities remain outstanding and may seek restoration of the company if taxes remain unpaid
• Directors can still be investigated by the Insolvency Service after dissolution if misconduct is suspected without the company being restored to the register
• Personal guarantees remain enforceable

Alternatives to Company Dissolution

Dissolution is not the only way to close a company. Depending on its circumstances, a business can also be closed using the following liquidation processes:

• Members’ Voluntary Liquidation (MVL) for solvent companies with significant assets.
• Creditors’ Voluntary Liquidation (CVL) for insolvent companies that cannot pay their debts.
• Compulsory liquidation where a winding-up petition has been issued.

What Happens to Employees When a Company Is Dissolved?

Because a company has to be solvent to be approved for dissolution, employees must be paid everything they are owed as part of the dissolution process, the employer must:

• Give employees notice: Within 7 days of sending the strike-off application to Companies House, directors must send a copy of the application to all employees.
• Follow redundancy procedures: Directors must have a fair redundancy consultation process before closing down the business.
• Pay staff what they’re owed: The company must pay all final wages, accrued holiday pay, notice pay, and statutory redundancy pay (if the employee has worked there for 2+ years) from company funds.

If the company is unable to meet these obligations, a formal insolvency procedure may be a better option. Employees may then be able to claim certain entitlements from the Redundancy Payments Service.

What Happens to the Director of a Dissolved Company?

When a company is dissolved, the director’s powers and responsibilities for that company come to an end.

However, directors should be aware that:

• Dissolution does not protect you from personal guarantees and these will remain enforceable
• The Insolvency Service can investigate director conduct after dissolution
• Creditors can apply to restore the company to the register
• HMRC can seek restoration where taxes are believed to be outstanding

Where misconduct is identified, directors may face disqualification proceedings and in certain cases can be ordered to personally compensate creditors for losses caused by their misconduct.This is why it’s important that directors ensure all company affairs have been properly dealt with before proceeding with dissolution.

How Liquidation Centre Can Help You Dissolve a Company

At the Liquidation Centre, we help directors across the UK understand the most appropriate and efficient way to close their companies.

If your company is solvent and meets the criteria for dissolution, we can explain the process and provide support on your duties as a director. If the company has debts it cannot pay, we can discuss the insolvency options available and help determine the most appropriate solution.

We offer a free, confidential consultation with no obligation.

Contact us today to discuss your circumstances and understand the best way forward.