Closing a limited company, whether it’s solvent or insolvent, can be a complex process. There are several ways to close your limited company, and how much the available options will cost depends on your company’s circumstances and why you want to close it.
Why do you want to close your company?
Directors may want to close a limited company for several reasons. If the company is insolvent and cannot pay its debts, closure is one of the routes available, as limited companies and their directors are a separate legal entity, and the debts will die with that limited company.
However, directors may wish to close a solvent, limited company if it’s simply come to the end of its useful life. The directors want to retire or want to close the company in a more tax-efficient manner.
Why does company solvency matter?
Your company’s solvent position has a bearing on your available options. The liquidation process designed to close solvent companies isn’t appropriate for insolvent companies.Is your company solvent or insolvent?
If you try to strike off an insolvent company, your creditors will object, and you could face a fine.
Who pays for a company liquidation?
Before the company enters liquidation, it should pay the liquidators’ costs if it can. In a solvent liquidation, this may not be an issue. However, if the company is insolvent and without sufficient assets, the directors or shareholders may have to cover the liquidation’s costs.
If company assets are insufficient, directors can sell company assets to fund the liquidation. They can even use their redundancy pay or take out personal loans, should there be no other feasible option.
How much does it cost to close a solvent, limited company?
Directors of solvent companies who can pay for their liabilities when they fall due can apply for a dissolution, striking the company off the register at Companies House. Striking the company off will cost £10. Doing so passes the company’s remaining assets and bank balances to the Crown.
If, however, you’re looking for a more tax-efficient option at a lower cost, you should consider a solvent liquidation.
A Members Voluntary Liquidation (MVL) is a process carried out by a licensed insolvency practitioner, closing a solvent company with enough assets to repay its creditors. Directors may wish to do this for several reasons:
- The company may no longer have a purpose.
- The directors may wish to retire with no line of succession.
- Directors may want to seek employment with another company.
Closing via an MVL also provides an opportunity for directors to apply for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief).
Our starting price for an MVL is £1,695 + VAT and expenses. This cost can vary depending on the company’s circumstances.Our full MVL pricing structure
How much does it cost to close an insolvent, limited company?
Directors cannot dissolve an insolvent company; creditors will object and relist the company. Nor can they close it via an MVL. Therefore, insolvent companies must engage a licensed insolvency practitioner to commence a Creditors Voluntary Liquidation (CVL), where the company is closed in an orderly manner, and company assets are sold to repay outstanding amounts to creditors.
Closing via a CVL is preferable to waiting for your creditors to issue a winding-up petition and force your company into compulsory liquidation.
The fees for liquidating an insolvent company vary depending on that company’s circumstances, such as:
- The level of debt.
- The number of shareholders.
- The value of the company’s assets.
For free, impartial, non-obligatory advice and a tailored quote for a solvent or insolvent liquidation, speak to our initial advice team.
The cost to close a limited company can depend on several variables and circumstances. Whether the company is solvent or insolvent will significantly impact the route forward and associated costs. Solvent companies can apply to strike off via a £10 DS01 form at Companies House. They can also apply for a Members Voluntary Liquidation (MVL) to benefit from Business Asset Disposal Relief (formerly Entrepreneurs’ Relief). Our MVLs start at £1,695 + VAT and expenses. If the company is insolvent, it is preferable to close via a Creditors Voluntary Liquidation (CVL) than allow creditors to force the company into compulsory liquidation. A CVL’s costs vary depending on the insolvent company’s circumstances.
In a Creditors Voluntary Liquidation (CVL), if your company has insufficient assets at the bank, you can use funds generated by selling company assets to pay for the liquidation.
The liquidator’s fees are paid first, then the remaining balance generated by the assets is distributed to creditors in the order dictated by the creditor payment hierarchy.
A breakdown of the creditor payment hierarchy
If the company’s funds aren’t sufficient to cover the liquidation’s costs, as director you should source alternative funding for the process. Should the need arise, directors can use their own redundancy pay to finance a CVL, by selling personal assets or taking out a personal loan if there is no other viable way to fund the liquidation.
A company director can choose to strike off a company by filling in a DS01 form for £10. Doing so removes it from the register at Companies House. A company must be solvent for the directors to strike it off.
Entrepreneurs’ Relief (renamed Business Asset Disposal Relief from 6th April 2020) reduces the amount of Capital Gains Tax you required on the sale of the company and its assets: 10% on qualifying assets gains.
If you close a solvent, limited company via an MVL, you may qualify for Business Asset Disposal Relief. However, you should be aware of the limit on the amount you can claim, currently £1m over a director’s lifetime.
More on Business Asset Disposal Relief
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