Closing a Limited Company: What You Need to Know
If you are considering closing a limited company, there are various things you need to be aware of. Here we outline the different exit strategies according to the situation of your company.
If the Company Is Solvent
If your company is solvent, this means that it can pay its bills. As outlined in official information, there are two options for closing a limited company in this situation:
- Get it struck off the Register of Companies
- Members' Voluntary Liquidation
The cheapest way to close the company is usually the first option. To get the company struck off, it must meet certain criteria (e.g. it must cease trading for at least three months).
You will then need to follow a number of procedures including informing all the interested parties, sharing the business assets between shareholders and informing HMRC that trading has ceased. Other tasks include closing bank accounts and making sure PAYE payments are up to date.
Once everything has been done, you can apply to Companies House to get the company struck off by sending Form DS01.
When it comes to a Members' Voluntary Liquidation (MVL), the process is different. This often occurs when a sole director retires and there is no one to run the business, or sometimes it is simply the best option.
In this case, a Declaration of Solvency must be signed, and a liquidator is appointed who will then administer the process.
If the Company Is Insolvent
In this situation, the company cannot pay its bills. In this case, you have to consider the people who the company owes money to (the creditors). Their interests come before the directors and shareholders.
In this situation, you will have to use a Creditors' Voluntary Liquidation. If you do not pay the creditors, the company might be forced into liquidation. However, you could also apply for a Company Voluntary Arrangement in order to avoid liquidation.
A Creditors' Voluntary Liquidation involves a number of steps, including ceasing to trade and calling a meeting of shareholders and a meeting of creditors. You must also make sure the liquidator has all the paperwork, and you may have to sell the assets to pay the debts due.
Let the Company Become Dormant
If your company is not trading any longer, you do not have to close it. Instead, you can simply let it become dormant. This is an option if it is not carrying out any business activity or trading and it does not receive any income.
You can keep it registered at Companies House, but you must continue to send its annual accounts. There is no limit on how long you can keep your company dormant.
Let Us Help with Your Exit Strategy
Exit planning is important for any company, and we can come up with a comprehensive exit plan for you with our exit planning service. We can help you whether you are planning on closing a limited company or selling it.
With our help, you can reduce your tax liabilities and ensure you get the maximum financial gains, as well as making the whole process as smooth as possible.
So get professional help and make the best decision for your limited company when you are planning to close it or sell it.
If you would like support in closing your limited company or would like to discuss alternative options for your business, please get in touch with a member of our team today.