When you close down a limited company, there is a lot to take into account. Whether you shut down voluntarily or are forced to shut down, there are processes and procedures to follow to make this legal and official.
We have made a list of the vital things to do or consider when you are closing your company. These points are things every company must carry out regardless of your circumstances.
- If you are voluntarily closing your company, you will need the agreement of company directors and shareholders before going any further with proceedings.
- Regardless of how your company closes, the first thing you will have to do is file a company tax return.
- On this tax return, you will have to account for any capital gains that have been made through the selling or disposal of your business assets.
- This may result in capital gains tax being owed by you or your company.
- You should show the details of any profits or loss you have personally made on the disposal of shares or the overall interest in your company.
- You will have to pay corporation tax for the final period of business. You will also have to pay this through the closing or winding up period too.
Making sure you fulfil all these steps is of great importance to finalise the end of the company and bring it to a legal end.
However, depending on your businesses circumstances, you may have extra criteria to meet and paperwork to fill in. Below, I will discuss the procedures involved to finalise the closing of your limited company whatever the current situation.
If you are letting the company become dormant
It is possible to let your company become dormant for tax purposes if your company is no longer trading but you don’t want to close it. However, you must make sure it is not trading, receiving income or carrying on any business activity.
By doing this your company will still be registered at Companies House and will be available to return to trading in the future. This is subject to the informing of the relevant authorities.
The process for solvent and insolvent companies
If your company is solvent, which means it can pay its bills, you have two options available to you. You can apply to have your company struck off the Register of Companies, which is the cheapest and easiest way or you can start a Member’s Voluntary Liquidation (MVL).
An MVL is a process to close down a solvent company. The funds will be distributed as capital to your company’s shareholders via a licensed insolvency practitioner who is acting as a liquidator.
If your company is insolvent and cannot pay its bills, there are different options and processes involved. In this situation, the interests of your directors and shareholders legally comes after the interests of your creditors – those who are owed money.
Where a company is unable to repay all its creditors a Creditor’s Voluntary Liquidation (CVL) process would be appropriate or your company may be forced into a compulsory liquidation. Avoiding liquidation may also be possible if you apply for a Company Voluntary Arrangement (CVA).
If there is no director at your company
First of all, you must appoint a new director if you don’t have one. A company that doesn’t have a director will eventually be struck off the register by Companies House but this can take a while. However, if this happens it will make it more difficult to manage the company’s assets. When it comes to choosing a new director for your company, all shareholders must agree through a voting process.
If a sole director has died and there aren’t any shareholders in your company, the executor of the estate can appoint a new director. This must be something that is stated and allowed in the company’s articles. The new director who is appointed can close the company if he wished.
You should be aware that your company still needs to pay corporation tax and file a tax return even if there is no director.
Closing a limited company can occur for a number of reasons but regardless of the situation, you must follow the appropriate procedures set out.