How can you close a private limited company?
The process of closing a limited company depends on whether it is solvent or insolvent. This is essentially the difference between the ability of the business to pay bills as they become due or not. However, insolvency also applies to the state of having more liabilities than assets. For more information, read Insolvency.
Closing a solvent company
Generally, the cheapest way to close a solvent enterprise is to have it struck from the Companies Register. In order to be able to do so, the company must not have traded, sold off any stock or changed its name within the last 3 months. It also it must not be threatened with liquidation or have any agreements with creditors.
To apply to have the company struck off, application form (DS01) must be signed by a majority of company directors and sent to Companies House. A fee must usually also be paid: filing your application will cost £44 by paper and £33 online.
Before applying to have your company struck off, all assets of the business need to be dealt with accordingly (eg close any company bank accounts), as any remaining assets will pass to the Crown upon dissolution.
A copy of the application form must be sent to anyone who could be affected (eg shareholders, employees and creditors) within 7 days. You may need to follow the correct procedure for redundancy if you employ staff and pay their final salary or wages. You must inform HMRC that you have stopped employing people by closing your PAYE scheme. You must also send your company’s final statutory accounts and Company Tax Return to HMRC.
The request to be struck off will be published in The Gazette and, if no one objects within 2 months, the striking off will take place and your company will be dissolved, with a notice to this effect published in The Gazette.
The alternative way to close a solvent company that you do not wish to run anymore is to pass a resolution of Members’ Voluntary Liquidation (MLV). To do this you have to:
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make a declaration of solvency, sign the appropriate forms in front of a solicitor or notary public and send these to Companies House (or the Accountant in Bankruptcy for Scottish companies) within 15 days of passing the resolution for voluntary winding up
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call a general meeting with shareholders within 5 weeks, pass a resolution for voluntary winding up and appoint an insolvency practitioner as a liquidator, and
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advertise your resolution for voluntary winding up in The Gazette within 14 days of passing the resolution
For more information, read Insolvency and Insolvency in Scotland.
Closing an insolvent company
A Creditors’ Voluntary Liquidation (CVL) must be used to close companies that cannot pay their bills or whose liabilities exceed their assets. This is the most common type of liquidation and needs to be proposed by a director. A meeting of shareholders must be called and a 'winding-up resolution' agreed upon by at least 75% (by value of shares) of shareholders. The resolution must be sent to Companies House within 15 days and advertised in The Gazette within 14 days. An authorised insolvency practitioner also needs to be appointed as a liquidator.
For more information, read Liquidation and Insolvency in Scotland.
Can you close a company without a director?
If a company does not have a director (eg because the sole director has died), a new director must first be appointed before the company can be closed. Although Companies House will eventually strike off a company with no directors, this can cause problems regarding the management of any assets.
Do I need to close a company which is not trading?
A company that is no longer trading can be left to become 'dormant' for tax purposes, as long as it is not receiving any income or carrying on any sort of business activity. However, annual accounts and confirmation statements must still be filed with Companies House every year.
How do I end a business as a sole trader or partner?
There is no official way of ending your business if you’re self-employed (eg a sole trader or partner).
You just need to tell HMRC that you are stopping self-employment, cancel any VAT registration and, if you employ anyone, handle all employment issues. For more information, read How to stop being self-employed.
A partnership may be dissolved using a Dissolution of partnership deed, but this will depend on the terms of the Partnership agreement. For more information, read Ending a partnership.
Follow our Checklist for closing your company if you want or need to close your company.
