Dissolution ends a company’s legal existence by striking it off at the register at Companies House. This procedure is voluntary and is for a company that has perhaps reached the end of its useful life. Although an insolvent company can be dissolved in certain circumstances, the procedure should not be used as an alternative to formal insolvency procedures where these are appropriate.
What are the criteria for me to strike off my company from the register?
In the three months prior to your application the company must not have any ongoing legal proceedings or insolvency proceedings, for example:
- An administrative or Law of Property Act receiver in office.
- The company is or could be subject to prosecution or disqualification.
- Have a pension scheme that has not been finalised.
- Changed its name.
- Traded or disposed of stock. It can, however, dispose of assets which it previously used as a means of trading (e.g. selling a now-redundant machine).
You should be aware that for six years after dissolution, your company can be restored by a creditor if they have a valid reason. A court order will be necessary to bring the company back by declaring the dissolution void and restoring it to the Companies House register.
What you need to do before applying for a dissolution
There are many steps you will need to complete in order to dissolve your company. Here is our step by step guide for how to deal with this:
- Get in touch with us to discuss your company’s current situation and we can help you decide whether dissolution is the correct option for your company.
- We can then help you fill in the appropriate paperwork or you can complete an application form yourself to apply to strike off your company from the register at Companies House.
- You will need to make a copy of this application and send it off to all creditors and interested parties such as shareholders, employees etc.
- There will be a distribution to all shareholders if the company is solvent. Do take advice though as it may be more tax efficient to do this via a Members Voluntary Liquidation.
- All employment liabilities should be dealt with including PAYE, outstanding wages or holiday pay, National Insurance Contributions and any redundancy pay.
- All statutory returns to HMRC and Companies House will need to be completed and filed with them.
- Finally, you will need to close your company’s bank accounts.
Who do I need to notify about my company dissolution?
After sending your application to Companies House to strike your company off the register, you have seven days to send a copy of the application to employees, shareholders and any other directors, or interested parties who have not already been informed. However, it is not just current employees that will need to be made aware, any old employees that have an employee pension fund with you should be informed.
You should also let all existing and contingent creditors (those with products under warranty for example), including HMRC, the DWP, your bank, your landlord, any suppliers and customers, know of your intentions to close your company. Rather than the creditors having to agree, the registrar will publish in the Gazette notice of the proposed striking off and all parties have three months in which they may object. If nobody objects the company will be dissolved and a further notice will be published in the Gazette.
How long does this take
After your creditors and interested parties have received a notification, three months must elapse to allow any obligations to be made. If no issues arise after this time period then the company will be struck off the register.
Three months is the minimum time that this process can take but it can be a long process if any objections are made.
What to do if creditors reject your dissolution
If we are handling your dissolution and a creditor decides to reject it, it’s important to get in touch with us and discuss the best route forward. If we are not dealing with your dissolution, we would advise that you speak to one of our advisors and we will help talk you through the creditors voluntary liquidation possibilities.
Can the company be restored?
If a creditor does not agree and feels that there are issues then they can request the company’s restoration. If this happens then the company can be liquidated when the conduct of the director may be investigated to discover whether any other issues need addressing.
Issues that could halt a dissolution from taking place include concerns that the director deliberately hiding problems, the company was insolvent or an interested party of the company’s, such as a supplier, was not informed of proceedings.
According to the Insolvency Service’s website, “any other person appearing to the court to have an interest in the matter” can apply for the restoration of a company. This would mean a creditor of the dissolved company, a former employee, former shareholder or former director would all be eligible to apply.
A creditor or the interested party will need to obtain a court order to be able to restore a company and they must have a good argument for why the company deserves to be restored. After restoration, the company will exist again and issues can be dealt with.
A dissolution is a procedure directors can use to close their company. Sometimes it can be confusing when trying to understand if dissolution is the most appropriate course of action. In some circumstances, liquidation would be the right procedure to legally close the company.
How we can help
Closing your company can be a complicated and frustrating process. We can take look at your circumstances and talk through options available to you. Our advice is free of charge and will ensure you remain legal and compliant when closing your company.
Book a free telephone consultation with one of our initial advisers