How to close your limited company

Is your company solvent or insolvent?

To start with, the way you close your company will depend on whether or not it is solvent or insolvent.

If your company can pay its bills, it is solvent.

If your company cannot pay its bills, its assets exceed its liabilities and/or it has any legal action taken against it in the excess of £750+, then it’s insolvent.

How to close your limited company if it is solvent

If your company has enough assets to be able to release its liabilities then you have a couple of options – you can either apply for dissolution (otherwise known as ‘striking off’) or choose a Members’ Voluntary Liquidation (MVL).

Dissolution
You can only dissolve your company if it hasn’t:

• traded or sold stock in the last three months
• changed names in the last three months
• been threatened with liquidation
• had an agreement with creditors

You’ll need to send a DS01 form to Companies House, which must be signed by a majority of the company’s directors and then a copy sent within seven days to anyone affected by the decision – this includes employees, directors who haven’t signed the form, members and creditors.

Before this, you’ll need to make sure that you have closed it down legally; this involves letting HMRC know and dealing with any business assets and accounts.

MVL
Members’ Voluntary Liquidation is the most tax efficient way to get money from a solvent company, as part of the process involves selling the company’s assets and distributing the profits to shareholders.

You’ll need to make a declaration of solvency, completing a statement saying that the directors have assessed the company and believe it can pay its debts, along with the company’s name and address, the company director’s names and addresses and how long it’ll take for the company to pay its debts (this must be no longer than 12 months from liquidation).

Following this, you’ll then need to:

• Sign the declaration along with the majority of directors in front of a solicitor.
• Pass a resolution with the shareholders for voluntary winding down.
• Advertise the resolution, within 14 days, in The Gazette.
• Send the signed declaration, within 15 days of passing the resolution, to Companies House.

How to close your limited company if it is insolvent

If your company is insolvent then you can arrange a Creditors’ Voluntary Liquidation (CVL).

You’ll need to call a meeting of shareholders asking them to vote – 75% must agree to the liquidation (or winding-up) in order to pass a ‘winding-up resolution’.

Once this has been decided, you’ll need to appoint an authorised insolvency practitioner as liquidator to complete the process, send the resolution to Companies House within 15 days and then ensure it’s been advertised in The Gazette within 14 days.

Here at Dolan Accountancy, we offer specialist insolvency services to limited company contractors. Take a look at our Insolvency & Dissolution Services for more information.

Contact our friendly team today to discuss your options and how we can help you. Either contact us via online chat, call us on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.