If you own a UK Limited company and you wish to close the company, it is very important to understand how to do it properly. This article will help you understand what you need to do before closing a Limited company that is registered in UK, and what to do once it has been closed.
Closing a limited company that has no external creditors is straightforward for someone who knows the correct procedure. For someone who does not know what the correct procedure is, it can be a risky undertaking. Consequently, it is advisable to seek the assistance of a professional such as an accountant or a solicitor. This is because, one could get fined for getting it wrong. This article will outline the main options for closing a limited company that has no debt or has debt but can pay off the debt.
A limited company is a legal entity with its own rights, privileges and liabilities. To close a company, an application must be made to
Companies House. The cost of closing a limited company varies depending on the type of company and its financial position.
Reasons for closing a limited company.
There are many reasons a person may want to close their limited company. Below are some of the most popular ones.
1. The owner wants to retire but can’t sell it because it has no value.
2. the owner has decided to go into full time employment and cannot sell the company.
3. the business that the company was used for is no longer viable or profitable and owner has no other use for the company.
What to do before closing a Limited company
If you are thinking of closing a UK Limited company, you will need to take a number of steps. These will depend on your business’s financial status and trading status.
The first step is to check your company’s financial health. This means that you need to know how much money your company owes to its creditors and how much it has in its assets. If there are more than one director, you may need to consult the other director if you have not discussed which method to use with them before.
Once you have an idea of your company’s finances, you can then decide which method to use. Striking off is the cheaper and less complicated option. However, it can take longer to complete the process because the company has to have ceased trading completely for a period of 3 months. I addition, if there are assets in the company they will need to be taken out in some way before the application for sticking – off otherwise those assets will be lost to the Crown.
Members’s voluntary Liquidation
You can close a limited company using members voluntary liquidation if your company has no creditors, or if it has creditors but it can pay them before the company is closed. This procedure enables a business owner to appoint a liquidator to close the company and distribute its remaining assets to its shareholders.
It is an efficient way to dispose of business assets and offers favourable tax benefits for the shareholders. However, MVL is not for every company. Depending on the complexity of the process, its cost can be high. It requires the appointment of a licensed insolvency practitioner. Upon this, the liquidator will take over the company’s affairs and make decisions.
Before the liquidation process can begin, the directors must be able to pay off all their creditors. They also need to sign a declaration of solvency. If the majority of the directors agree, they can proceed with the liquidation. Below are the mechanics of a Members’ voluntary liquidation:
In order to dissolve a company using a members voluntary liquidation., the members of Company must pass a resolution for the company to be dissolved via a members voluntary Liquidation.
Prior to passing the resolution, the company is required to make a declaration of solvency.
A declaration of declaration is simply a statement declaring that the company directors have reviewed the company’s assets and liabilities and believe that the company can pay its debts and any interest applicable At the official rate of interest. The declaration should also state:
1. The companies name and address.
2. Its directors name and addresses.
3. The length of time that it would take to pay its debts, which should be no longer than 12 months from the company’s date of liquidation.
4. A statement of the company’s assets on liabilities.
After the declaration statement, the company must perform the following:
1. The form must be signed by a majority of the company’s directors in the presence of a solicitor or a notary.
2. Within a period of five weeks, pass a resolution of shareholders voluntary liquidation at a general meeting of the Shareholders.
3. Appoint an authorised insolvency practitioner to liquidate the company.
4. The resolution must be advertised in The Gazette within 14 days of making the resolution.
5. The signed declaration should be sent to Companies House within 15 days of signing the resolution.
Company strike-off method
One method of closing a UK limited company is to strike off the company. This is a simple process and is not expensive. However, it is important to follow the right procedures to ensure the strike off is carried out correctly.
There are conditions before a company can be dissolved by striking off procedure, and they are:
1. The company should not have traded or carry stock within three months prior to the application for striking off.
2. There should be no change of name within the last three months.
3. All the directors must agree to the company being struck off the Companies House register.
4. The company must not be under a petition for winding up.
5. It should have no arrangements with creditors.
To strike off a company, a DS01 form must be filled out and signed by a majority of the directors. The form must be sent to Companies House. Once the DS01 is received, the application is considered to be an Active Proposal to Strike Off.
Objections to the application may be raised by the creditors. These will object to the striking off of the company. If there is any objection, the Registrar can uphold the objection.
Before applying to strike off a company, make sure that all the company’s bank accounts are closed and that there are no assets remaining in the name of the company. This is because when a Ltd company is struck off, it stops doing business. Its assets, including bank balances, will be distributed to the Crown.