Can I close my limited company and start another?
If your company is in financial difficulty and you’re considering insolvency, one of the questions you may be asking is whether you can close it down and start a new one.
In this article, we’ll explore this in more detail, including the options for closing your current company.
What’s the best way to close my current company?
This depends upon whether your company is solvent or insolvent. A really easy way find this out is to ask yourself 2 questions:
“Can your company pay its debts on time?”
“Are your companies liabilities more than its assets?”
Closing down a solvent company
If your company is solvent (i.e., the business can pay back any creditors or other responsibilities within 12 months), a Members’ Voluntary Liquidation (MVL) may well be the right course of action.
Another option for you to consider if you want to close down a solvent company is a striking off or dissolution. The business must not have traded for three months before the dissolution, and once this happens, it will be removed from the Companies House register and will cease to exist. As part of this process, you’ll need to notify any creditors, so they have three months in which to contest it. Provided you fulfil all the conditions, this is the quickest, cheapest and easiest way of closing a limited company. Remember though that if your company took a bounce back loan, you cannot use the dissolution/strike off process, the bank will object to it and you could land yourself in hot water with the insolvency service.
Closing down an insolvent company
If your business has ceased trading due to insolvency (you’re unable to pay debts or any bills due, or your liabilities outweigh your assets), you can close it down through a Creditors’ Voluntary Liquidation (CVL). This procedure allows the directors to retain some element of control over the process. They can choose their own liquidator, and a process will be identified whereby the company assets will be sold to make specified repayments to creditors.
For a company that’s burdened with debt and no reasonable prospect of recovery or the funds to pay for a Creditors’ Voluntary Liquidation, there may be no other feasible option other than to allow the company to be wound up by the official receiver. This process is known as compulsory liquidation. We strongly advise against waiting for a compulsory liquidation to happen as you could be in breach of your directors duties.
Am I able to start another limited company once I’ve closed the old one?
Provided you follow all the rules laid out by Companies House, and there hasn’t been a breach of the Company Directors Disqualification Act 1986 (this can see you face disqualification from being a director for up to 15 years), there shouldn’t be an issue with you setting up a new limited company.
To set up another company after you’ve closed an old one, you’ll need to start a new application at Companies House. You can do this in 10 minutes online and once the new company has been registered, you’ll be able to apply for bank accounts etc.
If you have chosen to go down the route of a pre-pack liquidation (where a newly-formed company purchases the assets of an existing company that’s subsequently liquidated), then some restrictions will apply.
You can find out more about pre-pack liquidations here.
Do I have to use a different name for the new company?
In limited situations, you’ll be able to use the same name as the liquidated company or a similar one.
However, you must follow strict rules and regulations before using the same trading name as before. If the conditions are not met, this can lead to fines, loss of limited liability and even the possibility of a prison sentence. Therefore, it’s always advisable to seek specialist advice before deciding on your new company’s name
Need more advice?
There are various financial and legal implications of closing any limited company, whatever the process, so it’s imperative to seek advice before taking any actions.
If you’re considering closing your company and need some advice about what the best option would be, get in touch for some free impartial advice.