How do I close my limited company?

Companies close all the time and there can be a variety of reasons as to why a director has taken the choice to close their ltd company down. The important thing is when the director makes the decision to close down their company, they follow the correct process.

There are several options available to you when it comes to wanting to close your ltd company. The first question that you need to ask, ‘is my limited company solvent?

If your business doesn’t have any debts or it can pay off any debts and still have over £25,000 left in cash or assets then a member’s voluntary liquidation may be the solution that you are looking for.

Covid loan repayments

Members Voluntary Liquidation, MVL or Solvent Liquidation

If your business is solvent and you can pay off all the company’s debts, you can liquidate the business with a Members Voluntary Liquidation or MVL for short. This is an effective way of closing down a Ltd company and disbursing cash to shareholders. An MVL offers a tax benefit called Entrepreneurs Relief, you will need a licensed insolvency practitioner to carry this procedure out for you.

What Does an MVL cost?

You will pay a liquidator £1,500 to carry out an MVL and on top of that you will have to pay disbursements, a small search fee and a bond that will depend on the asset value in the business. The bond is generally a few hundred pounds and your disbursements should come to around £250 + VAT

Is your company dormant or never traded?

If your company is dormant, never traded or has no debts and no assets it’s very straightforward. The directors will need to submit a form called a DS01 to the company’s house. It will be advertised and if no one objects within 2 months the company will be dissolved and no longer exist. There are companies out there that charge large sums to do this, but our advice is to do it yourself. It’s very simple and will only cost you £10.

The majority of the company’s directors will need to sign the DS01 form before it goes into the company’s house. It’s easier to make the payment online but if you are still using cheques remember that you can’t pay for this with a cheque from the company that you are attempting to strike off.

Once you have made the application you will get a letter from companies’ house letting you know they have received the DS01 and that it has been filled in correctly. Your request to strike the company off will then be advertised in either the London or Edinburgh Gazette, depending on where you are based. If no one objects, the company is dissolved from the register at companies’ houses – it will cease to exist.

Dissolving a Company With a Bounce Back Loan

Under no circumstances should you try and use this method if your company has taken a Bounce Back Loan and not been able to pay it back. There are directors being advised to do this and we would like to put it on record that it could lead to you being disqualified from being a director and made personally liable for some or all the business’s debts. If you do attempt to strike the company off from companies’ houses, it’s highly likely the bank or HMRC will object to the strike off as they will use software to keep a track on your company. If you strike off application does slip through the net and your company is dissolved, then the bank who lent you the Bounce Back Loan will apply to reinstate your company. The banks can’t claim on the government guarantee if they have allowed you to dissolve the company using this loophole.

If your business has taken a Bounce Back Loan or has other debts and can’t afford to pay them back, you need to take professional insolvency advice and find out more about placing your company into voluntary liquidation.

Company ceased trading

Closing your company with a voluntary liquidation

If your company has now become insolvent and there is little hope of recovery, then a creditors voluntary liquidation would bring the formal end to the company and ensure that your creditors position is not made any worse.

In a liquidation all unsecured debts of the company are written off. Examples of unsecured debts are Bounce Back Loans, HMRC arrears, suppliers [unless you have given a personal guarantee] energy bills and business rates. Once in liquidation all demands from you creditors are handled by the insolvency practitioner as they being to close the company down. A liquidation would also bring an end to any legal action that is being taken against your company.

What Does It Cost To Liquidate a Company

Your liquidation costs will depend on several things such as number of creditors, size of company and the amount of work that is involved. As a general rule of thumb, the cost to liquidate a small company with minimal creditors and little assets will be between £4- £6,000. This cost could be substantially higher for larger companies and more complex liquation’s.

If you are worried that you cannot afford to pay a liquidator’s fees then you may want to consider making a claim for director redundancy. If you are a director of a company and have been on the company payroll for over 2 years and work a minimum of 16 hours a week you will be entitled to some form of redundancy. The average claim is £9,000 which would be more than enough to cover the cost to liquidate the business.

As a responsible director you are required to take advice as soon as your business starts to get into financial difficulty. The earlier that you seek advice the more options there are available, and it normally ends in a better outcome for both the directors and the company’s creditors.

Don’t think that you are wasting someone’s time, a common thread with all our customers is that they wished they had taken advice sooner.

Join me tomorrow for a free webinar where I will be explaining how you can close your ltd company and also what you need to watch out for before you do.

It starts at 12 o’clock, register here.

Please get in touch and we’ll come back to you
without delay.

Call 0808 506 2246
Text 07717 738 167
Complete a Free Online Enquiry