Where to begin
If your limited company has ceased trading and you wish to close it down, there are certain procedures depending on the financial health of it. Just because you have ceased trading, it does not necessarily mean your business is insolvent, and as such, there are different options than if it was a case of insolvency.
What does ‘ceased trading’ mean?
A company that has ceased trading has stopped exchanging goods and or services, may have made employees redundant and may have also started selling company assets. This could be done for many reasons including company insolvency, director retirement or a director simply deciding that the business is no longer viable or what they want to pursue.
There are financial and legal implications of closing any limited company, and to ensure the obligations have been properly fulfilled, the proper advice is extremely beneficial. At 1st Business Rescue, we are the experts in helping businesses to either close or find a new way of operating, so we will be able to advise you on how best to close your company if it has ceased trading. Here is a brief overview of your options:
Solvency means that the business has the ability to pay back any creditors or other responsibilities within 12 months. If your business still has assets and/or money within it, it could be classified as solvent even if it has ceased trading. There are two options for closing a limited company which has remained solvent. These are:
1. Members’ Voluntary Liquidation (MVL)
If your business is able to pay off all debts and creditors and sell assets generating more than £25,000, an MVL is likely to be the most financially viable and tax-efficient way of closing it. Once the assets have been sold off to generate the money, this would be paid to the relevant shareholders as part of the closure. These shareholders would also be eligible for Business Asset Disposal Relief – your accountant will be able to advise on the tax advantages of this. Once all the processes have been completed, the business will be removed from the official Companies House register.
2. Striking off / dissolution
If you have no liabilities to creditors, staff or HMRC, but do not have any other assets totalling the value of £25,000 or more, dissolving the business is the quickest and easiest way of closing a limited company. As part of this process, you will need to notify any creditors so that they have three months in which to contest it. Your business must not have traded for three months prior to its closure, and once the process has been followed, it will be removed from the Companies House register.
If your company has ceased trading as a result of insolvency (wherein, you are unable to pay debts or any bills due or your liabilities outweigh your assets), you can close it by going down the path of a Creditors’ Voluntary Liquidation (CVL).
This procedure will allow any directors to close the business whilst maintaining some level of control over the process, including having the ability to choose your own liquidator. You will then set up a schedule of repayments to creditors through selling or realising assets. There may be other obligations to be met which is why it is advisable to use the services of a professional advice firm such as 1st Business Rescue.
Whatever the status of your business that has ceased trading, if you wish to close it, you will need to follow a formal procedure and getting the right advice can ensure you do this properly. At 1st Business Rescue, we are experts in every element of the closure of limited companies, so we will be able to advise you on the best path for your business.