Closing a Company at Companies House
Closing a company can be a daunting task, especially when it comes to navigating the complexities of Companies House regulations.
But fear not, as this step-by-step guide on “closing a company at Companies House” will walk you through the process, ensuring that you can dissolve your company smoothly and efficiently.
Understanding Companies House and Company Closure
Companies House, a UK government agency, plays a vital role in registering and dissolving companies.
Company closure, or dissolution, signifies the end of a company’s existence. To dissolve a solvent limited company, a majority of the directors must authorize the process, which typically takes a minimum of 3 months.
But what happens when a company needs to obtain authorisation for dissolution? This is where a winding-up petition comes into play, which must be submitted to the court.
The costs associated with closing a limited company depend on the method of dissolution chosen.
Once a company is dissolved, no further information, such as annual accounts or confirmation statements, needs to be submitted to Companies House.
Options for Closing a Solvent Company
Solvent companies have two options for closure: voluntary strike-off or members’ only voluntary liquidation or compulsory liquidation only. Each option has its own set of requirements, processes, and potential consequences.
Voluntary Strike Off
To pursue a voluntary strike-off, a company director must apply directly to Companies House to have the company struck off the register.
The company must settle all outstanding debts and not have traded within the last 3 months. The form to be signed and submitted to Companies House is DS01, and dissolving the company usually takes around 3 months after filing the report.
You must pay a disbursement fee of £10 to Companies House when submitting an application for striking off an application to strike off your company name. This amount is non-refundable.
However, if a company fails to satisfy the requirements for striking off, it must proceed with voluntary liquidation.
Before applying for strike-off, the company must notify relevant stakeholders, adhere to internal regulations when dealing with personnel, divest business assets, and liquidate their accounts.
Members’ Voluntary Liquidation
In members’ voluntary liquidation, a 75% majority of shareholders must vote in favour of winding up the business.
The directors must then declare and confirm that all debts can be paid within 12 months from the commencement of the winding-up process.
At the general meeting, a progress report is presented. Within one week of the meeting, the report and a Return of Final Meeting are sent to Companies House. A liquidator’s fee, typically upwards of £1500 plus VAT, must be paid.
Companies House will publish a ‘Notice’ in the Gazette. No objections must be raised within three months of this publication.
If no objections or legal proceedings are made, Companies House will issue a second notice to confirm that the company has been wound up and struck off the register.
Members’ voluntary liquidation is a more formal process than voluntary strike-off and involves a liquidator who assumes control of the company, altering the directors’ duties.
Once the liquidation process is concluded, the licensed insolvency practitioner convenes a general meeting of creditors and members, presenting a comprehensive report of the liquidation.
Closing an Insolvent Company
For insolvent companies, the only option for closure is Creditors’ Voluntary Liquidation (CVL). This process involves liquidating assets to repay the business’ debts to the extent possible.
Reducing misconduct allegations against directors and allowing them to claim redundancy pay are also part of the process.
Initiating Creditors’ Voluntary Liquidation
To initiate CVL, the directors of an insolvent company must propose the closure, and at least 75% of the voting shareholders must consent by passing a winding-up resolution.
A general meeting of shareholders has been convened. A 75% majority vote is necessary to pass the winding-up resolution and cease trading.
The company directors must then hold a creditors’ meeting within 14 days of passing the resolution and notify the creditors at least 7 days in advance.
At the creditors’ meeting, a Statement of Affairs must be presented. This statement is a summary of the company’s assets and liabilities, and a copy will be provided to the liquidator.
The liquidation process entails converting any assets into cash and distributing the funds to creditors in order of priority.
The liquidator has had the final meeting for the company. Its removal from the register will be completed within 3 months.
The estimated expense for CVL usually ranges between £3000 and £7000, and if the company’s assets cannot cover these fees, the company’s directors may be responsible for covering the costs.
Liquidation Committee and Director Responsibilities
The liquidation committee plays an essential role in aiding the insolvency practitioner in their duties, approving their remuneration, providing advice on the distribution of the company’s assets to creditors, and granting permission for certain actions by the liquidator.
On the other hand, company directors have the responsibility to furnish any information and assistance requested by the liquidator and may be made personally liable and responsible for the debts of their company in certain circumstances.
Directors may be eligible to claim redundancy pay during the CVL process. Claiming director redundancy could assist in offsetting the expenses associated with the process, and directors may also be entitled to receive other statutory payments, such as unpaid wages and arrears of holiday pay.
By opting for CVL, directors reduce the risk of allegations of misconduct or negligence, as they have taken the necessary measures to safeguard their creditors from further losses.
Handling Business Assets and Finances
Before a company can be closed, it is crucial to address business assets and finances, including transferring assets, settling debts, and submitting tax returns.
Ensuring that these aspects of the correct process are properly handled can help avoid any complications during the final accounts of the dissolution process.
Transferring assets refers to the process of transferring ownership or control of an asset from one person or entity to another.
This can be done through various means, including selling, gifting, or transferring ownership private limited company. It is essential to address any assets of the company, such as closing any bank accounts and transferring any domain names, before applying for striking off.
The consequences of transferring assets vary depending on the asset and the transfer method. For instance, transferring ownership of a business may have tax implications, whereas transferring ownership of a property may have legal implications.
Settling Debts and Taxes
Before the closure of a company, all outstanding debts must be settled. The final statutory accounts and a Company Tax Return need to be submitted to HMRC.
This is an important step in the company tax return and the process. It is crucial to ensure that all outstanding tax liabilities due, such as VAT, PAYE, or corporation tax, are paid in full before the company ceases operations.
Capital Gains. Tax may be applicable if any assets are removed from the company prior to its dissolution.
If the amount of assets withdrawn exceeds £25,000, it will be considered income and subject to Income Tax.
Entrepreneurs’ Relief may be available, but it will need to be calculated on the individual’s Self-Assessment Tax Return.
Notifying Relevant Parties
It is necessary to notify relevant parties, such as HMRC, Companies House, creditors, and any other applicable parties, of the company’s closure.
This includes submitting the final statutory accounts and a Company Tax Return to HMRC, as well as addressing any outstanding Corporation Tax liabilities from the accounting period prior to the commencement of the winding-up process.
When applying for voluntary strike-off, a duplicate of the application must be transmitted within 7 days to any individual who could be affected, including members (shareholders), creditors, employees, and directors who did not sign the application.
It is vital to ensure that all interested parties are well-informed about the company’s closure to avoid any potential disputes or complications.
Record-Keeping and Post-Closure Obligations
After a company has been dissolved, it is essential to maintain proper records of all transactions and activities associated with the company’s closure.
Companies must retain records for six years from the conclusion of the last company financial year they pertain to, or longer if they illustrate a transaction that spans more than half of one of the company’s accounting periods.
Specific documents must be retained following a company’s dissolution. Business documents such as bank statements, invoices, and receipts must be retained for a period of seven years post-dissolution.
An employer’s liability insurance policy and schedule should be retained for a period of forty years.
Dormant Companies and Their Closure
Dormant companies, or business entities that have not had any substantial accounting transactions during a given fiscal year, have a different set of requirements when it comes to closure.
To dissolve a dormant company, a director must submit Form DS01 to Companies House, accompanied by a £10 fee.
Before closing a dormant company, it is advisable to contact HMRC for verification of your company status and to ascertain if closing your company has had or will have any undesirable consequences.
Dormant companies are not registered as ‘active’ Corporations. Tax or any other tax liabilities, such as VAT or PAYE. Thus, they are exempt from these tax liabilities.
Withdrawing a Strike-Off Application
Withdrawing a strike-off application refers to the cancellation of the process of dissolving a company, allowing the company to maintain its registration with Companies House and continue its operations.
To withdraw the application for strike-off, the Companies House online service or a paper form DS02 can be used.
A signature from one sole director only is necessary to complete the withdrawal form correctly, provided the company is still registered with the Companies Register.
It is crucial to ensure that the withdrawal of the application is done correctly, as it may impact the company’s future operations and legal status.
Throughout this guide, we have covered the essential steps and considerations for closing a company at Companies House, including the processes for solvent and insolvent companies, handling business assets and finances, notifying relevant parties, and maintaining records post-closure.
By following this guide, you can confidently navigate the complexities of company closure and ensure a smooth and efficient dissolution process.
Frequently Asked Questions
How long does it take to close a company on Companies House?
Closing a company on the Companies House register typically takes around three months. This includes the time it takes to send a progress report and Return of Final Meeting to the Companies House register within one week of the meeting.
Following this, the dissolution of the company takes approximately 3 months.
How do I legally close a limited company?
To close a limited company legally, you must apply to Companies House using Form DS01 and provide evidence of the limited company itself’s solvency.
Once approved, your limited and company name will be officially struck and struck off by your company from the register.
How do I inform HMRC of a closing company?
It is important to make sure HMRC are informed of any company closure.
To do this, you should send a letter to HMRC informing them of your intentions and include a letter from shareholders to confirm the situation. You should also provide your final annual accounts and your final tax return too.
If you have a payroll scheme, make sure to ask for that to be closed. Doing so will ensure that HMRC is aware of the changes in your business.
Information For Company Directors
Here are some other informative articles for company directors in the UK:
- Bounce Back Loan Support
- Can A 50-50 Shareholder Put A Company Into Liquidation?
- Can I Be a Director Again After My Business Folds?
- Can I Be Investigated if My Company Goes into Liquidation?
- Can I Buy Back Assets During or After a Liquidation?
- Can I Reuse a Company Name After Liquidation?
- Closing a Company at Companies House
- Company Owes Me Money and They Have Gone Into Liquidation
- Director Advice
- Director Dispute Over Liquidation
- How Can I Turnaround a Failing Business
- I’ve Received a Bounce Back Loan Demand Letter from the Bank
- Is a Director Liable if a Company Can’t Repay a Bounce Back Loan
- My Business Is Struggling with Energy Bills
- On What Grounds Can a Company Director Be Disqualified?
- What happens if I can’t pay a Bounce Back Loan or CBILS Loan
- What Happens If Your Company Can’t Break Even?
- What Happens to Employees When Going Into Liquidation?
- What Happens to My Pension in Liquidation?
- What Happens When a Company Goes into Administration
- What is a Company Limited by Guarantee?
- What is a Winding Up Petition
- What is an Insolvency Practitioner?
- What is Fraudulent Trading for a Limited Company
- What Is Limited Liability?
- What’s the Difference Between a Liquidator and the Official Receiver?
- Who Values the Assets in a Company Liquidation
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