Everything You Need To Know About Closing A Limited Company
When it comes time to close a limited company, especially one that you put a lot of effort into starting up, it can be an emotional and stressful time. One way to make this process less stressful is to know everything there is to know about closing a limited company. This way, you won’t be going backwards and forwards between different authorities and will be able to focus on closing your limited company as efficiently as possible.
The entire process can take as long as three months from beginning to end, so you should brace yourself. Whether closing your limited company will be a breeze or a challenge requiring professional guidance will all depend on your particular circumstances. In this article, we lay out everything you need to know regarding closing your limited company in the UK.
The easiest way to close your limited company: striking off
Want to know the easiest way to close your limited company? It is a process called ‘striking off’. In order to have your company struck off, you’ll need to send an application to Companies House.
Your business will also need to meet the following requirements:
- The last three months have been no trade months
- Your business hasn’t changed its name in the last three months
- There are no current legal proceedings involving your business
- No disposals for value of property or rights have been made
If you feel your company meets all of these criteria, you should go to the Companies House website and download the DS01 Form. Once the majority of directors has signed this, you can deliver it to Companies House via the mail or online. Within the week of submitting this form, you should notify all important parties, such as employees, creditors, shareholders, etc. If Companies House accepts your application, it will show the information on the public register within seven days.
Why do you need to inform important parties of the submission? So they have the opportunity to object to the closing, but we’ll get to that a bit later.
Member’s voluntary liquidation
Only solvent companies have the opportunity to close under a member’s voluntary liquidation. It is seen as the next best thing to ‘striking off’ for companies who do not meet the striking off criteria. In order to close your business through voluntary liquidation, the company directors need to declare that the business will be able to pay all of its debts within 12-months of the closing process.
The first step is to make a declaration of solvency. Within the next five weeks, your company directors will need to propose a resolution to liquidate the company voluntarily. There will need to be a 75% vote to proceed. Once this has been passed, a notice should be put in the Gazette within two weeks.
A liquidator will have to be appointed to take care of the entire process and complete and submit the LQ01 Form to Companies House.
Upon completing the liquidation process, an insolvency practitioner will hold a meeting with all members and creditors and discuss a full report. The report will also need to be sent to Companies House and the return of the final meeting. The company can expect to be dissolved within three months of the submission.
Creditor’s voluntary liquidation
The other option available to you is a creditor’s voluntary liquidation. This is an option if your limited company is unable to pay its debts. A director will need to call together all shareholders for a meeting to kick things off. A special resolution will need to be passed, and from there a liquidator will need to be appointed to handle the entire liquidation. Companies House will also need to be sent the resolution within two weeks of this meeting.
The resolution will also need to be advertised in the Gazelle, and a creditor’s meeting will need to be held within two weeks of submitting the resolution. They’ll also need a week’s notice before this meeting takes place.
Part of this process involves all business assets being converted into cash in order to pay creditors. The company can expect to be struck off the register within three months.
Compulsory liquidation
Compulsory liquidation occurs when a company cannot pay its bills or debts, and no compromise or resolution can be made with your creditors. In this case, creditors may become very unsatisfied and may ban together to apply to the court for a winding-down petition and have all of your assets liquidated.
This can be an incredibly stressful process, and you may want to seek professional help if you find yourself in this situation.
How much does it cost to close a company?
The obvious costs involved in closing a company are paying your debts and your employees’ wages and salaries. But there are also other costs involved in closing a company.
Striking off a company with Companies House is considered to be the cheapest option as all that is required is the £10 disbursement fee to Companies House upon submission. Any type of closure that involves a liquidator means that you’ll need to pay a liquidator’s fee, which can be anywhere from £1,500 upwards. Another fee you will have to consider is the fee you will need to pay to the Gazette for publishing various notices.
When it comes to the creditor’s voluntary liquidation, you can expect high costs, such as the liquidator’s fee. Anything that assets cannot cover will need to be covered by the directors themselves. In a creditor’s voluntary liquidation, some of the costs are handled by the creditors, but you can expect all of your assets to be liquidated.
Who can object to the closing of a company?
Since there is a notice period involved in closing a limited company, there is the opportunity for interested parties to make objections. Who could these interested parties be? These can include employees, directors, clients, creditors, shareholders, or even the company itself. All objections need to be made in writing to Companies House.
This article was originally published on Real Business.