How to close a limited company

If your business has more than £25,000 in assets, then you could find that a Members Voluntary Liquidation (MVL) is a more tax-efficient option than simply striking off your company. Especially as directors can take advantage of Business Asset Disposable relief to qualify for a lower 10% rate of Capital Gains Tax.

It’s a more complicated process, which requires you to call a general meeting of the shareholders, and pass a special resolution to begin the process of winding up your business. To do this you’ll need to make a declaration of solvency (or ask the Accountant in Bankruptcy for form 4.25 for Scottish companies)

The declaration must be signed by the majority of directors in front of a solicitor or notary public, with a general meeting of shareholders within five weeks to pass a resolution for voluntary winding up.

You’ll then need to appoint an authorised insolvency practitioner as a liquidator, who will then take control of the business, including settling legal disputes, outstanding contracts, payments to creditors, and the final liquidation costs and VAT bills. It’s important to note that they’ll act in the interest of the creditors, not directors.

You also need to advertise the resolution in The Gazette within 14 days. The liquidator will call a general meeting once the winding up process is complete, and their progress report will be sent to Companies House, along with the Return of final meeting form.

Once this is all finalised, the company will be dissolved within approximately three months of the filing date.

If your company owes money to creditors, those individuals or organisations can apply to the court to get their debts paid by either issuing a statutory demand or getting a court judgement.

If you receive a statutory demand, you are required to respond within 21 days by either paying the debt, reaching an agreement, putting your company into administration, or applying to liquidate the company yourself. It’s also possible to apply to the court within 21 days to restrain creditors from applying to wind up your company.

You have 14 days to respond to a court judgement, with the additional option of challenging judgement, which can include asking to change the terms, pay in instalments, or cancel it if you don’t actually owe the debt.

In both cases, you should seek specialist advice from a solicitor to ensure you respond appropriately.

Creditors can apply to the court with a ‘winding-up petition’, and if accepted, the court will arrange a date for a hearing. If it’s decided you can’t pay your debts, a winding-up order will be issued, and your company will be put in the control of an officer of the court, known as the official receiver.