Closing down a limited company is no small thing. Your company is an actual entity unto itself, and there are rules and regulations to be complied with, and multiple levels of tasks to completed.
Of course, we want to stress that consulting with a corporate lawyer is one of the first things you’ll want to do – to make certain all the i’s and t’s are dotted and crossed. However, we can take a look at some of the basic steps required by the UK government, sharing links with you to various pages of relevant instructions.
To begin with, the manner in which you close your limited company depends upon its ability to pay the bills and resolve any long term debt. If there are funds to handle said payments, you are coming from a solvent position; if not, your situation is termed as insolvent.
There are two ways to close a solvent company; the first (the Strike Off) is essentially a do-it-yourself version, and with the second (the Members’ Voluntary Liquidation) you are assigning the work of winding up the company to a licensed Liquidator.
The least expensive way to closing down a limited company is to apply to have it ‘struck off’ the Companies House Register. You may do this as long as your company has not threatened liquidation, hasn’t changed its name or traded/sold stock in the past 3 months, and has no Company Voluntary Arrangement (CVA) with a creditor.
Following are several steps to follow:
- Legally inform any interested parties
- Treat your employees according to rules of redundancy
- Attend to your business accounts and assets
- File a Form DS01 with the HMRC, signed by a majority of the directors (note: the £10 fee cannot be paid with a company account).
- If the form has been correctly submitted, your 3-month notice will be published in The Gazette.
- If no complaints are filed, a second notice will be published; meaning the company has been dissolved.
Members’ Voluntary Liquidation
Generally, this option is chosen if you are planning to retire, or step down from a family business (and there is nobody else to run it). The following six steps are taken for this choice of solvent closure:
- Download a Declaration of Solvency form 4.70 . In Scotland, contact the Accountant in Bankruptcy for the appropriate form for Scotland.
- Complete the form, and obtain the signature of a majority of your Directors.
- Call a shareholders meeting and vote on and pass a Resolution for Voluntary Winding Up.
- Within 14 days, advertise the resolution in The Gazette.
- Within 15 days of passing the resolution, mail the signed form (see Item 1) to either the Companies House (Companies House, Crown Way, Cardiff CF14 3UZ ) or Accountant in Bankruptcy.
- Appoint a licensed insolvency practitioner as your Liquidator, who will wind up the company.
If the company owes money to its creditors, legally the creditors’ interest takes precedence over that of your directors and shareholders.
Creditors’ Voluntary Liquidation
If there is unpaid (and non-resolvable) debt, a Director may propose this type of liquidation and, if enough shareholders go along, the company will cease trading and be ‘wound up’ (liquidated).
- Pass a Winding-Up Resolution
- Call a Shareholders’ Meeting
- Vote on the voluntary liquidation and agreement to winding up.
- Pass the vote by 75pc of total shares value.
- Appoint a Liquidator (authorised insolvency practitioner)
- Submit the Resolution to Companies House within 15 days of its passing.
- Advertise your Winding Up Resolution in The Gazette.
A limited company can be liquidated (against its will) if it cannot pay the creditors it owes money, and will not voluntarily liquidate its assets.
A) take steps to get a court judgement – the company has 14 days to respond. If you fail to respond, your assets may be seized and sold, and unpaid creditors can apply to the court to have your company wound up.
B) issue a statutory demand for payment – the company has 21 days to respond, and unsatisfied creditors can make apply to the court to force a wind up of your company.
Your Company’s Options:
A) to pay the debt
B) come to an agreement of payments (CVA)
The Role of the Liquidator
Now, let’s look at the changes which are going to take place once your company has been assigned to a Liquidator. Immediately upon appointment, the Liquidator is in control of the business and acts solely in the interests of the creditors, not the directors or shareholders.
Their duties include:
- Settling legal challenges and unresolved contracts
- Meeting with creditors, as needed
- Selling off assets
- Paying final VAT bill and liquidation fees
- Removing the company from the companies register
- Deciding on the priority of creditor payments
- Paying off your creditors
- Determining where the company went wrong; interviewing director(s)
- Informing authorities and meeting paperwork deadlines
Changes in Your Director’s Authority
You must have a Director in place in order to liquidate the company, so if you currently do not have one, you must take that action first. Once the Liquidator is appointed, they take over for the Director (who no longer has control or is allowed to act on behalf of the company; and who must hand over all assets and paperwork). If your conduct has been deemed as unfit, you might be banned from 2-15 years from taking another Director position.
Whether the closure is compulsory or voluntary, you may not form, manage or promote any like-named company for five years, with the following exceptions:
- a licensed insolvency practitioner has sold the business with the required legal notice
- the court gives you specific permission to use the name
- you hold a position of owner or officer of another company (or another type of business) which has been using the same name as your liquidated company – for a minimum of one year.