Closing Companies Down
Companies close down all the time, for a number of reasons. One reason might be that the purpose for the company no longer exists. Another one is that the directors/shareholders have decided to cease trading. In all cases, the way in which a company is closed down depends on whether or not the company is solvent or insolvent.
If closure is what you wish to achieve, we can advise on the most appropriate and efficient method to bring your business to an end, working closely with other professional advisers (accountants, banks and insolvency practitioners).
If the Company you wish to Close is Solvent
There are two ways of closing a solvent company
Firstly, striking off the company. To do this the company must have stopped trading for 3 months, not have changed its name in the previous 3 months and have no threats of liquidation or formal creditor arrangements in place.
After this a number of formal procedures need to be adhered to:
- Interested parties must be informed, including HMRC, employees, creditors, shareholders and pension fund managers.
- The rules and regulations surrounding redundancy payments, outstanding salaries and holiday pay must be followed.
- All business assets must be apportioned between shareholders, using the shareholders’ agreement, if there is one.
- The preparing and filing of the statutory accounts and the company tax return with HMRC, and the payment of any outstanding tax liabilities, including corporation tax and VAT.
- Closure of all company bank accounts.
Secondly, a Members’ Voluntary Liquidation (MVL). In this instance, it has to be established that the company is solvent, and a declaration of solvency will need to be signed to prove this. Once a winding up resolution has been passed, a liquidator will be appointed to administer the process.
An alternative is to let the company lie Dormant
In this case, the option to let the company trade again in the future remains. Annual Returns are still required, and dormant accounts will need to be filed.
If the Company you Wish to Close Down is Insolvent
These are the ways of closing down an insolvent company:
Thus is similar to a Members’ Voluntary Liquidation in terms of the filing requirements and timescales, but it places creditors, with the objective of realising as high a return for them, at the forefront of the procedure. An Insolvency Practitioner has to be appointed.
- Compulsory Liquidation
In this case, one of an insolvent business’s creditors goes to court to seek that business’s liquidation in order to recoup the money they are owed.
If you are considering closing your company down, and wish to seek advice on the options available to you, please contact us or call us on +44(0)121 214 2490, for a FREE initial discussion.