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How do I close a solvent limited company?

Being solvent means that your company can pay all of its bills as they fall due, and the value of its assets exceeds that of its liabilities, including any contingent liabilities. If you’re sure that your company is solvent and you wish to close it down, you have two choices.

One is an inexpensive method that’s typically recommended for solvent businesses with straightforward affairs. The other is a formal route to closure that offers significant tax advantages and must be administered by a licensed professional; this is known as liquidation

It’s advisable to seek expert guidance before proceeding as there may be elements of your business that indicate the formal option would be advantageous. Our team at Company Closure can let you know the best way to close your limited company and offer the support you need.

Voluntary dissolution – an informal route to closure

Company dissolution, also known as voluntary strike-off, closes your company and removes its name from the Companies House register. The process can be undertaken by yourself as a director and involves winding down your business affairs over several months.

You must repay all your creditors, for example, close down your payroll scheme, pay all tax liabilities, and also make any redundancy payments to staff. To be eligible for this form of closure your company must not have traded or changed its name in the last three months.

Additionally, you must not have made any formal agreements with creditors on behalf of the business. Voluntary dissolution is inexpensive, which makes it a popular choice, but there are two key elements you need to consider before applying for strike-off.

  • Is your company definitely solvent? If not, you could face scrutiny from the Insolvency Service for failing to prioritise your creditors.
  • Are your business affairs complex or relatively straightforward? The formal MVL option may be more suitable if your business affairs are complex, and can offer you considerable tax benefits.
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How to close your company via strike off

You apply to close the company using form DS01, which is completed online or sent by post to Companies House. One of the most important elements of the process is to make sure you send a copy of the application to all creditors and stakeholders within seven days.

If no objections are made after Companies House places a notice in the Gazette, the company name is removed from their register and another Gazette notice is placed to that effect.

Members’ Voluntary Liquidation (MVL) – formal and tax-efficient

Members’ Voluntary Liquidation, or MVL, may be a more suitable way to close your solvent business if it owns high-value assets, for example, or has retained profits of £25,000 or more. As part of the process, you must sign a declaration of solvency, attesting to the fact that the company is able to clear all its liabilities (if any exist) in full within 12 months.

An MVL is administered by a licensed insolvency practitioner (IP) who oversees the distribution of company assets and retained profits to members. A key advantage of this option is that distributions are taxed as capital gains rather than income.

This means you can extract more value from your business and may even be able to reduce your tax liability further to an effective rate of 10 per cent if you’re eligible to claim Asset Disposal Relief.

 Don’t Fall Foul of Unqualified Advice

Beware of the risks of unregulated advisers – only licensed insolvency practitioners can handle insolvency appointments and closure procedures from beginning to end. In contrast, unlicensed insolvency advisers will pass your enquiry onto a third party and charge a premium for doing so. Contact our licensed, specialist team today for FREE.

How to close your company via MVL

You’ll need 75% of your shareholders to agree to enter Members’ Voluntary Liquidation. A resolution is then passed to that effect and a licensed insolvency practitioner is appointed.

In brief, the insolvency practitioner invites any claims from creditors and pays them where appropriate. They sell/distribute the company’s assets and wind down the business’s affairs before removing the company from the official register.

Apart from the clear tax benefits of entering Members’ Voluntary Liquidation, if your company affairs are complex you also have the reassurance that they’re dealt with correctly by a licensed professional.

For more information on how to close your solvent limited company, please get in touch with our expert team. Company Closure offers free, same-day consultations and operates an extensive network of offices around the country.

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With multiple offices across the UK and a vastly experienced team of business closure experts, you are never far away from the advice you need. Our Licensed insolvency practitioners provide free consultations to all directors and shareholders, and can quickly ascertain which closure method is best for your business.

We are licensed by recognised professional bodies and have helped thousands of directors over many years. Contact us today for your free company closure consultation.

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