What is the cheapest way to close my company?

One of the cheapest ways to close down a company is by voluntary dissolution. This involves a small administrative fee and can be carried out using form DS01. Strict eligibility rules surround voluntary dissolution, however, and the main requirement is that your business is solvent.

This is because if you close down a company that still has debts you’re depriving one or more creditors of repayment, which breaches UK insolvency laws and can result in personal liability in some cases.

So how does voluntary dissolution, also known as voluntary strike off, work?

Voluntary dissolution is a director-led process that has no requirement for professional involvement. This contrasts with formal liquidation procedures that must be conducted by licensed insolvency practitioners (IPs).

Directors undertake all the steps to wind down their business, from closing their payroll to distributing company assets, and the application process can be carried out online with Companies House if required.

One issue that can emerge when taking this route is unexpected insolvency. You may believe that your company can repay all of its debts but this may not actually be the case, especially if contingent liabilities exist – such as employee claims against the company.

This can tip a seemingly solvent business into insolvency if a claim is successful, making voluntary strike off an unsuitable route, even though it’s cost-effective. It’s imperative, therefore, to seek professional confirmation of the financial status of your business before taking any steps towards business closure.

If you want to close your company but it has debts, it’s worth knowing that a formal liquidation process called Creditors’ Voluntary Liquidation is available. If you believe that you won’t be able to afford the professional fees involved you may be able to fund it via the sale of assets.

Alternatively, some directors can pay for a CVL by claiming director redundancy pay. This and other statutory redundancy payments may be available to you if you’ve worked under a contract of employment for two years or more.

Company Closure can offer professional guidance on director redundancy and advise you on the cheapest and most suitable method of closing your business. Please get in touch with our expert team to arrange a free consultation – we operate a nationwide network of offices.