How to close a limited company in the UK

Shaun Barton

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Shaun Barton | Company Closure Expert

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How to close a limited company in the UK

When it comes to closing a limited company in the UK, there are a number of closure options available to company directors depending on the position of the company at the time of closure. It’s important to close a limited company using the correct procedure so that you don’t put yourself at risk of breaching your duties as a director, or risk unnecessary financial losses for your creditors.

Liquidation is commonly used to close a company, whether that company is solvent or insolvent, and involves a licensed insolvency practitioner (IP) winding down the business’s affairs. For solvent companies, it can be a highly tax-efficient procedure to follow.

Liquidation also benefits directors of insolvent companies, however, as they’re able to prioritise their creditors’ interests as is required by law. Company dissolution (or strike off) is another way to close a limited company in the UK, and this is an informal method that’s conducted by the company’s directors.

How to close a solvent company via Members’ Voluntary Liquidation (MVL)

Solvent companies can pay their bills as they fall due and the value of their balance sheet assets is higher than their liabilities. The company’s members pass a resolution to enter Members’ Voluntary Liquidation (MVL) and a licensed insolvency practitioner carries out the process.

Assets are sold or distributed amongst the shareholders and distributions are taxed as capital gains. If a shareholder is eligible to claim Business Asset Disposal Relief (BADR) their tax liability is further reduced to an effective rate of 10 per cent.

What if a company has distributable profits of less than £25,000, however?

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Voluntary company dissolution to close a solvent company

You can close your limited company via dissolution if the business is solvent and you haven’t traded or changed its name for three months. You must also not have entered into any agreements with your creditors.

In the case of voluntary dissolution, it’s the directors who wind down the business’s affairs. This includes closing down the payroll scheme, informing creditors of the plans to close, and paying any tax liabilities that remain due.

It’s highly advisable to obtain professional assistance when establishing the business’s financial position before entering this process, however, as company dissolution isn’t appropriate for insolvent companies.

Need to speak to someone?

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.

Closing an insolvent company via Creditors’ Voluntary Liquidation (CVL)

If your business is carrying unmanageable debt and cannot be rescued, Creditors’ Voluntary Liquidation offers you the best way out of the situation. It allows you to execute your legal duties as a director of an insolvent company, which is an important consideration in these circumstances.

As with solvent liquidation, CVL also requires a licensed insolvency practitioner to be appointed to carry out the process. This involves selling business assets at a liquidation auction and distributing the proceeds amongst creditors according to the statutory ranking.

Although your actions as a director will be investigated during a CVL, by voluntarily closing your company in this way you reduce the chances of wrongdoing or misconduct accusations being made against you.

Company Closure can provide further advice on closing a limited company in the UK, tailored to your circumstances. We offer free, same-day consultations and operate a broad network of offices nationwide. Please get in touch to find out more.

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2024-01-29T15:33:16+00:00
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