The method of closing a company with Companies House depends on whether the company is solvent or insolvent. In cases where the company is solvent, two options are available – voluntary dissolution or Members’ Voluntary Liquidation (MVL).
If a company owns significant assets, MVL may be the most appropriate option. Conversely, if a company is insolvent or approaching insolvency, a different type of liquidation procedure must be followed, known as Creditors’ Voluntary Liquidation (CVL).
Guide to Closing a Solvent Company at Companies House
Voluntary Liquidation (MVL). To qualify for voluntary dissolution, the business must not have traded, changed its name, or sold any property for three months before applying, and there must be no ongoing legal action against the company.
Directors must complete Form DS01 and submit it to Companies House, along with a £10 fee. Before applying for dissolution, they must close down the payroll, submit all outstanding statutory returns and accounts, pay outstanding tax liabilities, sell or transfer assets out of company ownership, inform creditors of the intended closure, and close the company’s bank accounts.
Once the application has been accepted by Companies House, a notice will be published in the Gazette. If no creditors raise objections within two months, the company name will be removed from the register.
Members’ Voluntary Liquidation
MVL, or Members’ Voluntary Liquidation, is an advantageous way to close a company at Companies House when a significant distribution is to be made. An insolvency practitioner is appointed to arrange the sale of business assets and distribute the proceeds among members.
Members’ Voluntary Liquidation offers significant tax benefits when closing a solvent company as the distribution is treated as capital rather than income. Furthermore, members eligible for Business Asset Disposal Relief (BADR) can benefit from a tax rate of 10% on eligible gains, up to a lifetime limit.
The appointed insolvency practitioner supervises the asset sale and distribution, and once the process is completed, the company’s name is removed from the register at Companies House.
Procedure for Closing an Insolvent Company at Companies House
When a company is insolvent, it must follow a legal process known as Creditors’ Voluntary Liquidation, or CVL, which involves liquidating its assets to pay off outstanding debts to the extent that the proceeds allow.
The CVL process is managed by a licensed insolvency practitioner and concludes with the company being removed from the Companies House register. As a voluntary procedure, it decreases the possibility of directors facing allegations of misconduct or negligence since they have taken the necessary step to protect their creditors from further losses.
In addition, directors could be eligible to claim redundancy pay, which could help offset the cost of the process.
To qualify for director redundancy, the following criteria must be met:
- Receiving a salary via PAYE, rather than solely through dividends
- Working a minimum of 16 hours per week
- Having worked under a contract of employment for a minimum of two years
- Being owed money by the company
Directors may also be entitled to receive other statutory payments, such as unpaid wages and holiday pay arrears.
Expert Advice on Choosing the Best Method to Close Your Company
To avoid disqualification and potential sanctions against directors, it is vital to seek professional guidance before closing a company at Companies House. Although dissolution may seem like an inexpensive option, attempting to close an insolvent company in this way is unlikely to succeed. Creditors who are informed of the intention may object and make a claim against the company for the debt owed.
If you need reliable and independent advice on closing your company at Companies House, InsolvencySupport.co.uk can help. With free, same-day consultations and offices across the UK, our experts can guide you on the correct process for closing your company. Contact us today to ensure a smooth and lawful closure of your company.