At times, for one of many reasons or a combination of many reasons, it may be necessary to effectively bring all business operations to a close. UK company closing procedures need to meet certain statutory requirements, and will hinge on the financial status of your company – i.e. is your company solvent or insolvent?.
In other words, does your company have the liquidity to clear all dues or does it require a liquidator? After you have answered this question, you can then go about closing the company. Here is all that you need to know about closing your UK company in different possible scenarios.
Scenario 1 – Your company is solvent
If in the event of your company being fully solvent, then closure involves simply getting your entity off the Registrar of Companies through Companies House. However, to do so, the following actions need to concluded:
Intimation/dissemination of information regarding intent or process of closure. This needs to be shared with anyone who may be deemed to be impacted by the closure.
Closure of bank accounts held by entity
Submit Form DS01 to Companies House with applicable fee, and share the intimation to all concerned
Clear all backwages of employees, if any
File statutory accounts, Company Tax Return to HMRC and intimate cessation of trading to HMRC
Store dissolution records for a period of 7 years post closure
These actions need to be concluded so as to meet the following mandatory requirements, following which the company will be struck off the Register by Companies House, within three months of receipt of application, subject to nil objections.
Clearance of all dues to creditors
Cessation of all forms of trading during the preceding three months
No change in name, style, identity or representation of company during the preceding three months
No pending agreements with Creditors
Scenario 2 – Your solvent company opts for MVL (Members Voluntary Liquidation)
This option is chosen to dispose off assets to clear all dues owed to creditors and distribute the balance among the shareholders. This process involves securing the assent of the majority of shareholders, filing the concerned form with Companies House and availing the services of a liquidator to conclude the MVL.
Here are a few important requirements that need to be borne in mind when opting for MVL as an option to close UK company.
An important pre-requisite is the need for a declaration of solvency, which should precede all actions by atleast five weeks.
Convene a general meeting of shareholders and secure the assent of majority, reducing the same to writing, through a resolution.
A notification needs to be advertised in the London Gazette, about the declaration and the resolution for voluntary liquidation.
A form titled ‘Members Voluntary Winding Up Declaration of Solvency’, needs to be filed with the Companies House within fifteen days of the resolution being passed.
A liquidator needs to be appointed for the purpose of liquidation of assets, by taking control of the same.
Scenario 3 – Your company is insolvent and needs to be closed
In the event that your company does not have the liquidity to clear dues, then it needs to be closed by taking the creditors voluntary liquidation route. Here, the onus lies on the directors to ensure that precedence is given to protecting the full interests of the creditors, following which the company’s interests and that of its shareholders can be considered.
Here are a few important requirements that need to be fulfilled when the decision to close UK company through this method becomes inevitable.
A special resolution needs to be passed by calling for a vote among shareholders on the decision to cease trading, following which the resolution should be passed by the directors.
The creditors to whom the company owes dues need to be informed of the decision. An advertisement in the London Gazette needs to be placed, giving the creditors seven days notice of a meeting convened to discuss the liquidation. This advertisement needs to be placed within 14 days of the resolution for liquidation is passed. The meeting should then be convened where a Statement of Affairs is presented.
A liquidator needs to be appointed for the purpose of liquidation of assets, by taking control of the same. There are other options available if you are undecided about the future. For instance, you could also choose to keep your company dormant for a certain period, if you wish to revisit the functioning at a later date. However, if your plans are long term – for instance about five years ahead, then closing the company is the better option. Here are other aspects of closing down a company.
Close accounts – Here the company accounts needs to be collated and compiled for the period from last accounts to final trading date.
Close payroll processes – The Inspector of Taxes needs to be intimated about cessation of trading and a final P35 Employer’s Annual Return needs to collected from the HMRC.
De-registration of VAT – The HMRC needs to be informed about cessation of trading, seeking deregistration of VAT.
Complete tax returns – A company tax return needs to be submitted to the HMRC for the period, requesting for a closure of the corporation tax scheme.
All the above processes require a high degree of professional knowledge and experience, and the best option open to companies in any given scenario is to avail the services of accounting services who will take care of all paperwork, make necessary arrangements for valuations, and take up correspondence with regulatory authorities and stakeholders on your behalf. This frees you from all hassles, unburdening you, while at the same time ensuring complete compliance to avoid future complications.