How can I close down my company?
There are several ways to close down a company in the UK, with the appropriate option depending on whether the entity is ‘solvent’ (i.e. it can pay its bills) or ‘insolvent’ (i.e. it does not have enough money to pay its bills). Whichever route is chosen, it is imperative that all company directors with an interest in the company and its shareholders are in agreement about its closure.
Closing down a solvent company
Under company law in the UK, the two main methods of closing a solvent company are:
1) Having the business removed from the Register of Companies (this is also referred to as ‘striking off’). A limited company can be removed from the register, but only if it has not traded or sold any stock or changed names in the past three months. This method can also be used as long as the company has not been threatened by an injunction and it does not have an agreement with its creditors (such as a Company Voluntary Arrangement – CVA). If none of these apply, the only other way to close a solvent company is a members’ voluntary liquidation.
To apply to have a company struck off the register, form DS01 must be completed and signed by the majority of shareholders and submitted to Companies House. Online applications currently cost £8. Before the form is sent to Companies House, all of the assets of the company should be dealt with – e.g. selling assets and closing down bank accounts.
2) Entering into a members’ voluntary liquidation. This is a common method for closing a company used by those who wish to retire from running their business, or step down from a family business that no one else wants to run. In England and Wales, to enter into a members’ voluntary liquidation, you will need to:
- Draft a declaration of solvency confirming that the company can pay its debts. The declaration should also include the name and address of the company, the names and addresses of the company’s directors, how long it will take the company to pay its debts (this must be no longer than 12 months from when the company is liquidated), and a statement of the company’s assets and liabilities.
- Call a general with your shareholders no more than five weeks later to voluntarily wind up the company.
- Appoint an authorised insolvency practitioner to manage the winding-up process
- Advertise the resolution in The Gazette within 14 days.
- Send your signed declaration to Companies House within 15 days of passing the resolution.
Closing down an insolvent company
The process of closing an insolvent company requires that the entity be liquated, to which creditors are given first priority. In this scenario, a director would effectively need to recommend that the company cease training and that it should be liquidated (this is also referred to as ‘winding up’). For the liquidation to proceed, shareholders must be given the opportunity to vote on the proposal, and a sufficient number must agree (those who agree must hold at least 75% of the value of the shares). In the event that enough shareholders with sufficient shareholding agree to the liquidation, a director must then:
- Appoint an insolvency practitioner to manage the process of liquidating the company
- Send the resolution to Companies House within 15 days
- Advertise the resolution in The Gazette within 14 days
- In this scenario, the appointed liquidator will play a key role in winding down the business, however, it is important to note that they will act in the interests of the company’s creditors rather than the directors; their tasks include:
- • settling any outstanding legal disputes or contracts
- selling off any remaining company assets; the proceeds of any sales must be used to pay creditors
- meet deadlines for paperwork and keep authorities informed
- pay liquidation costs and the final VAT bill
- keep creditors informed and involve them in decisions where necessary
- make payments to any remaining creditors
- interview the directors and report on what went wrong in the business
- get the company removed from the companies register
As part of the process of liquidation, directors effectively lose their control of the company and its assets, nor can they continue to represent the company. They must also comply with the requests of the liquidator, including providing any paperwork, records, and information needed.
If you are unsure which method to use to close your business, speak to a specialist in commercial law who can advise and represent you. They will also explain the implications of the closure, including any remaining responsibilities, the rules on accessing the company bank account, and whether the same company name can be used again in the future.
Guillaumes LLP Solicitors is a full-service law firm based in Weybridge, Surrey. We have a highly experienced commercial law team who can assist you with all matters relating to the closure of your company. To make an appointment, please call us on 01932 840 111.