Upcoming Tax Changes
The government has announced changes to Business Asset Disposal Relief (BADR):
- From 6 April 2026, the tax rate will increase from 14% to 18%
If you are considering an MVL before these changes take effect, it is important to act early to allow sufficient time for the process to be completed.
How to close a limited company help & advice
Closing a limited company can be a complicated process with numerous ways to go about it depending on the company’s solvent position. Before taking action, you need to know whether the limited company is solvent or insolvent. Knowing this determines what action can be taken when deciding to close a limited company.
Closing a solvent company
If you are looking to close a limited company and it’s solvent, there are two options available depending on the value of the company’s assets. For this purpose, solvency is defined as being able to repay all existing and prospective debts when they fall due.
Members Voluntary Liquidation (MVL)
If the company can realise sufficient value from the sale of its assets to repay creditors in full and leave at least £25,000 left over for distribution to shareholders, then directors can apply for a Members Voluntary Liquidation (MVL).
- The company’s assets are sold or realised, with the proceeds used to pay creditors in full.
- Often a cost-effective and tax-efficient way of closing a limited company.
- Allows shareholders to take advantage of Business Asset Disposal Relief (Entrepreneurs’ Relief).
Once the limited company is closed down, the remaining cash would then be distributed to shareholders, and the company would be removed from the register at Companies House.
More on Members Voluntary Liquidation
Dissolving a limited company
If at least £25,000 cannot be realised from the sale of company assets, an MVL may not be the most cost-effective way of closing down a limited company. In which case, dissolving the limited company, or ‘striking off’, may be more appropriate and cost-effective.
- A dissolution would involve the company being removed from the company register at Companies House and ceasing to exist.
- There are specific criteria that a company needs to adhere to in order for it to be successfully dissolved.
- The company cannot have traded for three months prior to the dissolution.
It is a common misconception that a director can’t close a company via dissolution if it owes anything to creditors. However, directors can apply to have the company dissolved in such circumstances. Directors are required to inform all creditors and other interested parties of the striking off and make them aware that they have three months in which to contest it.
Closing an insolvent company
Closing a limited company is still possible regardless of whether that company is solvent, however, the processes available differ. A company is usually deemed to be insolvent if it can no longer meet its day-to-day obligations or if its liabilities outweigh its assets on the balance sheet.
In this instance, the following methods to close down a company are available:
Creditors Voluntary Liquidation (CVL)
A Creditors Voluntary Liquidation (CVL) is a formal liquidation procedure for companies that are insolvent and can no longer continue trading.
- A CVL involves closing a limited company through the realisation of its assets in order to make repayments to creditors on a pro-rata basis.
- A director may not want to close the company, but there simply isn’t enough cash to pay creditors back, which means the business has no viable future in its current form.
More on Creditors Voluntary Liquidation
Restart your business in a new limited company
In some circumstances, directors can restart the same business using a new limited company and a different trading name. In special instances, a limited company can use a similar trading name as its predecessor.
In some cases, an insolvent company can sell its assets and restart trading in the name of a new limited company, a procedure known as a pre-pack sale.
- Pre-pack can be achieved either through administration or liquidation.
- They work slightly differently, but both close a limited company, with another restarting in the ashes of the old company, which is known as a phoenix company.
A pre-pack liquidation will see the old company, ‘oldco’, liquidated and closed. During that process, the directors have the option to purchase assets from the oldco at full market value and transfer them into the new company, ‘newco’.
Pre-pack administration works slightly differently. It is a much faster process, whereby the wholesale of a company will be already organised. The remaining staff, assets, work in progress, and certain aspects of the company are then simply transferred over to the new directors.
More on closing and restarting a limited companyHow we can help
If you are looking to close your company, we can help guide you through the potential insolvency procedures. Whether solvent or insolvent, we can advise you on the best route forward and close down your limited company. We offer a fast and efficient service with nationwide coverage, meaning a free consultation can be arranged at a time to suit you.
- Speak with our initial advisers via phone or online chat. If we can help, we will arrange a free consultation with one of our consultants to discuss your situation in more depth.
- During the consultation, we will advise if entering into an insolvency procedure is the most appropriate route forward, or what alternative options are available.
- After your consultation, if there is an appropriate route forward, we will issue the relevant documentation for you to formally engage us.
In summary
The process to close a limited company depends on whether the company is solvent or insolvent. If you need to close an insolvent company, you may have no choice but to liquidate, which you can do so voluntarily, or it could be forced upon you. If you believe that the company could continue trading, but could only do so without creditor pressure, then there are different rescue methods that could work. Even when undergoing a liquidation, there are ways to move your company forward.
FAQs
Can a limited company go bankrupt?
In the UK, bankruptcy only applies to individuals, and companies cannot enter bankruptcy like their US counterparts. Liquidation is the equivalent process for UK-based insolvent companies.
More help for insolvent companies
Can creditors force a company to close down?
If a company owes a creditor more than a certain amount of money, that creditor can apply for a winding-up petition. If the directors don’t act quickly, the petition can force the company into compulsory liquidation.
More on compulsory liquidation
How much does it cost to close a limited company?
Depending on the nature and complexity of the business and its solvent state, the cost to close a limited company may vary. For solvent companies, our standard MVL cost is £995 + VAT and expenses. The cost to liquidate an insolvent company can vary depending on its circumstances.
More on the costs to liquidate a limited company
Case Studies
Oldham Precision
Kelly Burton • Construction & Engineering • Administration
Machining engineers Oldham Precision has been bought out of administration saving all 12 jobs.
The company’s principal activity was the sub-contracting manufacture of large volume batch precision machined components for clients across a wide range of industries including aerospace, paper converting, printing, coatings, electronics and valve construction.
Administrators Kelly Burton and Lisa Hogg from Sheffield business turnaround experts Wilson Field were appointed joint administrators on 17 January after the company suffered cash flow problems.
Originally established in 1982, the company, based at Red Rose Business Park on Shaw Rd in Royton, offered subcontract engineering including CNC milling, grinding and turning.
After advice from Wilson Field, the business was sold to the existing management team as a going concern saving all 12 employees’ jobs.
Kelly Burton, director in the Leeds office at Wilson Field said;
“Following discussions with the director, the business was sold as a going concern, safeguarding all 12 employees’ jobs and offering a better return for the company’s creditors than alternative options.
“The new company will be under the same management offering the same standards of service to its customers.”
ET Rowlands & Sons
Kelly Burton • Automotive • Administration
Assets from the well-known Telford road haulage contractor ET Rowlands & Sons, which has closed after nearly 60 years in business, are to be sold by auction online.
The firm, known for its striking red livery on its vehicles, provided road transport solutions for UK and continental Europe and operated a modern mixed fleet of rigid vehicles, tractor units and trailers.
Last week’s closure of the company, set up in 1958 by 87-year-old current director Mary Rowland’s father, saw all 28 jobs made redundant after the company lost a major contract and potential hopes for a pre-pack sale were dashed.
Kelly Burton and Lisa Hogg from Yorkshire-based insolvency specialists Wilson Field were appointed joint administrators of ET Rowlands and Sons on 13 June at a meeting of members and creditors.
Wilson Field, have instructed valuers and asset management consultants Charterfields to dispose of the assets of the company, which operated a warehouse facility in Telford.
Vehicles and other items up for sale includes a fleet of 14 tractor units, seven rigid and flat HGVs by Scania, DAF and MAN, 14 curtainside and three flat back trailers, personalised numberplates including P7 ETR, P12 ETR, R4 ETR, S7 ETR, T2 ETR, V2 ETR, and 6 ETR, plant and office furniture. Other vehicles include a Vauxhall Movano 3.5T Dropside and Ford Transit T350 Panel Van.
Kelly Burton, director and insolvency practitioner at Wilson Field, said: “ET Rowlands & Sons was a well-established family run business that experienced loss of a major contract.
“The director came to Wilson Field for advice but regrettably the company entered administration and has been closed. As a consequence all 28 jobs have been lost. It is always sad to see a long-standing company go out of business with the loss of jobs.”
The online auction is now open and closes Tuesday July 4 from 12 noon. For further details visit www.charterfields.com
Rooster Punk Ltd
Kelly Burton • Media & Entertainment • Pre-Pack Administration
Advisors from Wilson Field have rescued a London headquartered advertising agency after it was bought out of administration by the existing management team.
Rooster Punk Ltd was established in 2012 and specialised in providing creative content for technology and financial services brands to better interact with clients and customers.
The company, which traded from head offices at Queen Victoria Street in London with a second office in Clifton Down Road in Bristol, called in administrators from Sheffield-headquartered Wilson Field for formal insolvency advice.
The company had experienced significant growth since set up and posted profits each year up to and including October 2016.
However loss of funds due to a bad debt combined with the termination of customer contracts and rising business overheads had created cash flow problems.
Kelly Burton (pictured) and Lisa Hogg from Wilson Field were appointed as joint administrators on December 6 and concluded a pre-packaged sale of the business and assets to Rooster Punk Group Limited lead by the same management team of Rooster Punk Ltd.
All remaining nine staff at the time of the sale were saved and transferred to the new company under TUPE.
Kelly Burton, director and licensed insolvency practitioner at Wilson Field said:
“Wilson Field considered the company’s precarious financial situation, which was borne as a result of a number of factors including the Samsung contract under billing, loss of funds due to a bad debt from a start-up, termination of customer contracts and rising business overheads.
“Despite attempts to cut back overheads, including reducing staff numbers from a peak of 24 down to 10, the directors recognised the company’s precarious position and sought formal insolvency advice from Wilson Field, and advice on alternative options available.
“The pre-packaged sale has mitigated employee termination claims in the nature of wage arrears, accrued holiday pay, redundancy and pay-in-lieu of notice totalling £33,680.
“It has preserved the value in the company’s intangible assets, namely its goodwill and work in progress and maximised the value of the company’s trade debtors due to the continuity of service to the company’s customers by the successor business.”
Valuations were handled by Robert McArdle of David Currie & Co with legal services and advice from solicitors Irwin Mitchell LLP.
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