Close and Start Again
Author
Shaun Barton | Company Closure Expert
Can I close a limited company and start again?
There are various ways to close down a limited company but the most suitable depends on the solvency of your business. If the company is solvent it means you can pay its bills as they fall due and the value of business assets exceeds that of its liabilities.
You can close both solvent and insolvent businesses and start again, but there are some restrictions on the new company name. These are in place to prevent directors from closing their company down and moving on simply to avoid repayment.
How to close down a solvent company and start again
If the company can repay all its debts, plus interest, within 12 months, and has more than £25,000 of retained profits, Members’ Voluntary Liquidation (MVL) is likely to be the most appropriate method of closure.
It’s a tax-efficient option for the right businesses as distributions are subject to Capital Gains Tax (CGT) and not income tax. Additionally, you can reduce the rate of CGT to 10% if you’re eligible for Business Asset Disposal Relief.
Alternatively, voluntary dissolution may be an option but you must be sure that the business is solvent before proceeding on this route. With voluntary dissolution, you follow certain steps to wind down your business affairs and must notify all creditors of your intentions to close.
Can I close a business with debts and start again?
You can close down your business and start again, even if it has outstanding debts. The recommended route, in this case, is Creditors’ Voluntary Liquidation (CVL), as it prioritises your creditors and protects them from additional financial loss.
Compulsory liquidation, which involves a creditor or group of creditors winding up the company, can leave you at risk of misconduct allegations and could result in more limited opportunities to start again with another company.
This is because compulsory liquidation triggers a comprehensive Insolvency Service investigation to determine the reasons behind the company’s failure. It can lead to disqualification if any questionable transactions or conduct emerges, and the potential to be held personally liable for the business’s debts is also present.
Possible issues when starting a new company?
Reusing the company name
Strict rules are in place concerning the use of the same or a similar name as the liquidated company. If the company was forcibly liquidated you cannot use the same name or a similar name again.
Personal guarantees and overdrawn directors’ loan accounts
If you’ve provided a personal guarantee for the old company’s borrowing, or your directors’ loan account was overdrawn, you’ll have to repay the outstanding amounts as they’re assets of the insolvent company.
HMRC security deposit
If the insolvent business carried tax debts and they believe they’re at risk of further losses, HMRC may demand a security deposit before they allow the new company to conduct trade.
Company Closure can provide more professional advice on the best way to close down your limited company and explain any potential roadblocks to starting again with a new business. Please get in touch to arrange a free consultation – we operate offices across the country.
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