Close a limited company

Making the decision to close a limited company is a complex process filled with regulatory, financial and operational considerations. It’s also a significant and sometimes emotional decision for you to make. 

Our expert team is committed to giving tailored solutions and compassionate guidance for every business facing this crossroad, whether solvent or insolvent. 

Options for closing a limited company

There are several paths for directors thinking about closing their limited company. The most appropriate option will depend on the financial status of your company: whether it’s solvent (able to meet its debts) or insolvent (unable to pay debts as they fall due). 

We’ll help you to understand the condition of your company and then look at the pros and cons of each closure option, which is essential to ensuring compliance and minimising future repercussions.

Closing a limited company with debts

If your company has debts that it cannot pay in full, when due, it could be insolvent. In the case of insolvency, there are options to close your limited company in a way that repays your creditors to the greatest extent possible. 

The most common of these is Creditors’ Voluntary Liquidation (CVL). CVL is designed to liquidate the company in an orderly manner, ensuring that the resulting funds are distributed fairly among creditors under the supervision of a licensed insolvency practitioner. 

This path not only addresses creditor concerns but also allows directors to fulfil their legal obligations and mitigate personal liabilities.

It’s important to note that taking a proactive route like a Creditors’ Voluntary Liquidation is often preferable than doing nothing and letting debt mount up. This is because creditors can seek to force a company into liquidation by submitting a request to the courts – known as a winding up petition. This can result in the compulsory liquidation of the company.

If you’re facing a winding up petition, act now by calling our expert team. In some cases, we’re able to intervene and allow you to voluntarily liquidate your company.

Closing a limited company that’s solvent

For companies that are financially healthy but for various reasons decide to cease operations, a Members’ Voluntary Liquidation (MVL) provides a structured process. An MVL is a tax-efficient method to wind up a company, allowing it to pay off its debts and distribute remaining assets among shareholders. 

We often use this procedure for those looking to retire, change their professional direction or simply extract profits from a company that’s no longer needed.

Striking off a company vs liquidating a company

The decision on whether to strike off or liquidate a company fundamentally depends on your company’s financial health and the goals of the directors. 

Striking off, or dissolution: This is a route suitable for companies without debts, or after debts have been settled. It require you to stop trading and to submit a request for the removal of the company from the Companies House register. 

The drawback is that if you have outstanding debts – including to HMRC – the strike off can be suspended and the directors pursued for the money owed. 

Liquidation: This method of closing a limited company involves a complete winding up of the company’s affairs, including asset distribution. It’s a formal process managed by a licensed insolvency practitioner and can be applied to both solvent and insolvent companies. Liquidation is a thorough, transparent method to close a company, offering legal clarity for all parties involved.

Leaving a company dormant vs closing a limited company

Leaving a company dormant: This is an alternative to formal closure for directors who aren’t ready to completely wind down their company. A dormant company does not trade and has no significant transactions but remains registered at Companies House. 

This option maintains the company’s registration and allows for easy reactivation of business in the future. Company accounts do still need to be filed, which can make this option a drain on time and money.

Closing a limited company: Whether this is done through striking off or liquidation, it results in the complete cessation of the company’s existence. When done correctly and according to all legal requirements, it means that there’s no outstanding obligations that need to be met.

Our team is here to offer the support and guidance you need when navigating the closure of your limited company, whether it’s solvent or has debts.