Closure Options

Shaun Barton

Shaun Barton | Company Closure Expert

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Closure Options

When it comes to closing a limited company, there are a number of options available to company directors and shareholders depending on the financial and operational position of the business at the time of closure.

It is important for directors to understand the closure options open to them as the chosen method determines how the company’s operations will be wrapped up, its assets distributed, outstanding liabilities settled, and its legal obligations fulfilled.

There are two main ways to bring about the end of a limited company in the UK; liquidation and strike off also known as dissolution:


Liquidation is a formal insolvency process administered by a licensed insolvency practitioner who will assume the role as liquidator during the process. Liquidation can be used to close both solvent and insolvent companies, and can be entered into voluntarily by the directors and shareholders, or forced upon the company following a court petition by its creditors. There are three main types of liquidation:

  • Creditors’ Voluntary Liquidation:

Creditors’ Voluntary Liquidation (CVL) is the most common type of liquidation, and is used to bring an insolvent company to a formal and orderly end. A CVL is entered into voluntarily by the insolvent company’s directors who appoint a licensed insolvency practitioner (IP) to oversee the process. The company’s assets are sold, and the proceeds are used to pay off outstanding creditors as far as possible. Any debt which remains after all company funds have been used will be written off and the company will cease to exist as a legal entity.

  • Members’ Voluntary Liquidation (MVL):

Members’ Voluntary Liquidation (MVL) is used when a solvent company wants to wind up its affairs and distribute its assets among shareholders. It’s a tax-efficient way to close a limited company, as the distributed assets will become subject to capital gains tax rather than income tax. Shareholders may also be able to take advantage of Business Asset Disposal Relief (BADR), lowering the tax rate payable even further. An MVL requires the appointment of a liquidator to handle the process.

  • Compulsory Liquidation:

Compulsory liquidation is similar in process to a CVL, however, as the name suggests, a compulsory liquidation is forced upon the company by order of the courts rather than entered into voluntarily. The compulsory liquidation process is initiated by the company’s creditors, often due to unpaid debts. In this scenario, the court orders the company’s closure, and a liquidator is appointed to sell assets and settle outstanding debts. Directors and shareholders have limited control over the process.

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Company Strike Off

If a limited company is dormant and no longer trading, its directors may opt to apply for voluntary striking off. This process is relatively straightforward and cost-effective. It involves notifying Companies House and paying a nominal fee. However, it’s important to ensure all outstanding liabilities and legal obligations are settled before applying for strike off.

If the company has debts that it is unable to repay in full, then strike off is not an appropriate solution. Creditors are able to object to the proposed striking off of a limited company if money is owed, and the only alternative way to close down the business will be via a formal liquidation process.

In conclusion, choosing the right closure option for a limited company depends on its financial status, legal obligations, and the preferences of its shareholders and directors. Each method has its own advantages and disadvantages, and it’s crucial to seek professional advice to ensure an informed decision about the company’s closure is made.

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.

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