If you decide to close a company, you will need to satisfy a number of requirements, and the dissolution process will depend on whether your business is solvent or insolvent – i.e., does the company have enough money to pay its bills?
If your company is able to pay its bills, it is solvent and there are two options available to you:
- apply to Companies House to strike your company off the register, or
- begin a members’ voluntary liquidation
If your company cannot pay its bills, it is insolvent. To close a company that is insolvent you must use the creditors’ voluntary liquidation process.
How to close a company that is solvent
Option 1 – Strike your company off the Companies House Register
If your limited company is able to pay all of its debts, the easiest way to wind up the business is to strike it off the register at Companies House. To do so, your company must meet all of the following conditions:
- It has paid all debts owed to creditors
- It has not traded within the past 3 months
- It has not changed its name within the past 3 months
- It is not under threat of liquidation
- It has no agreements in place with any creditors, such as a Company Voluntary Arrangement (CVA)
Directors are legally responsible for overseeing the proper closure of the business. Their duties in such circumstances are as follows:
- Notify all directors, shareholders, creditors, employees, managers or trustees of employee pension funds (if applicable), and any other parties who may have a vested interest in company about the application to strike it off. All of these individuals and organisations will be affected by a company’s closure and may object to any application being made.
- Ensure all business bank accounts have been closed.
- Cancel any domain names the company may have.
- Complete and deliver Form DS01 to Companies House along with a £10 fee. To be valid, this application must be signed by the majority of directors.
- Within 7 days of filing Form DS01, the directors must provide copies of the application to all parties with a vested interest, as mentioned above.
- Pay all wages or salaries due to employees.
- Inform HMRC that the company is no longer trading and is being dissolved.
- Share all assets amongst the company’s shareholders before it is dissolved.
- File a final Company Tax Return and statutory accounts with HMRC.
- Pay any Corporation Tax, and any other tax that the company owes.
- Retain all company documents and financial records for at least 7 years after dissolution.
If there are no objections to the application, Companies House will strike your company off the register within 3 months.
Members’ voluntary liquidation
A members’ voluntary liquidation is another process of winding up a solvent company. It involves using company assets to pay all money owed to creditors. If there is any money left over after the bills have been paid, the surplus income can be distributed amongst the shareholders. To close a company in this way, the following is necessary:
- Companies registered in England and Wales should make a Declaration of Solvency, whilst those registered in Scotland should request the Form 4.25 from the ‘Accountant in Bankruptcy’.
- A General Meeting should be held for shareholders to pass a resolution for voluntary liquidation. The declaration of solvency must be made within 5 weeks leading up to this resolution being passed.
- Within 14 days of the resolution passing, the company should place an advertisement in either the London or Edinburgh Gazette.
- A liquidator should be appointed to take control of the business and oversee the winding-up process.
- Form LQ01 should be submitted to Companies House by the liquidator within two weeks of appointment.
Close a company that is insolvent
If your company cannot pay its bills, you will need to implement a creditors’ voluntary liquidation. The following steps should be carried out in order to initiate the process:
- The shareholders should pass a special resolution during a general meeting at the calling of the directors to stop trading, wind up the company, and appoint an insolvency practitioner.
- An insolvency practitioner should be appointed to act as the liquidator and take control of the company’s closure.
- A creditors meeting should be held (with 7 days notice provided in the London or Edinburgh Gazette) to be presided by one of the directors, with the liquidators in attendance.
Within 15 days, the resolution to voluntarily wind up the company should be filed with Companies House. The directors are legally responsible for ensuring the interests of creditors are protected ahead of the interests of the company and its shareholders.
If closing a company that has never traded and therefore doesn’t have any accounts do we have to file a final statutory account and tax return. We don’t have any assets liabilities, never traded
Thank you for your kind enquiry, Gemma.
If the company has never traded and is less than 12 months old, you can file to dissolve the company without the requirement of filing annual accounts.
If it is over 21 months old, you may be required to file annual accounts prior to the dissolution. Companies House will inform you if this is the case, once you file for dissolution.
If you would like for our company to dissolve this company for you, please call 020 7871 9990 and we would be happy to help. Alternatively, please take a look at our Company Dissolution Service here: https://www.rapidformations.co.uk/company-dissolution/
Regards,
Rachel
Hi,
How do you contact HMRC to tell them that the company is longer trading and is being dissolved?
Thanks
Martha
Hi Martha
Thank you for your message. In terms of HMRC you can write to them at the address provided on the original correspondence for your company (a letter called CT41G) or any subsequent Corporation Tax letters to advise them when the dissolution process began and they can confirm this against Companies House. HMRC will ultimately be updated by Companies House when the company is dissolved.
Best Regards,
Hello, a group of friends and myself decided to create a company in the UK. It has not being running, it was only registered and created. It hasn’t been having any king of activities, actually we haven’t open an account anything. Thus, I was wondering how can we close the company? We don’t want to get it run, as the circumstances of each one changed. Do you have any advise/solution?
Dear Angela
Closing a company in the UK is reasonably simple though requires certain procedures to be undertaken before the company can be dissolved.
It is a service we offer so please see our page on company dissolution https://www.rapidformations.co.uk/company-dissolution/
Best Regards,
Hi Rachel,
Could you please specify this point: Retain all company documents and financial records for at least 7 years after dissolution. Where should it be stored/archived? Should HMRC/Companies House be informed where the documents are being stored?
Thank you in advance
Dear Irina,
The information for a dissolved company can be held anywhere of your choosing as long as it can be made available to HMRC should they require it. The authorities do not need to be made aware as to where the documents are being stored.
Best regards,
Rapid Formations Team
Hi there! I am a bit confused with how do we inform HMRC that the company has stopped trading? I have looked everywhere and can’t find this information And when do we send the annual tax return? After or before the strike off? Thanks in advance and great article, really helpful!
Dear Joana,
Thank you for your kind words.
You would advise that the company is no longer trading by writing to the HMRC office which deals with your company. In terms of filing a tax return, you would do this before the company is struck off to give HMRC a chance to review the information.
Best regards,
Rapid Formations Team
Hi Rachel,
Do rapid formations offer a closure service for ltd companies that have not traded ? That were formed through yourselves.
Hi,
Thanks for your message.
I’m afraid we do not offer a company dissolution service – you will have to apply directly to Companies House using the procedure outlined in the article.
Best wishes,
Rachel