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Checklist for closing your company

Often company owners (known as ‘shareholders’) will sell their company when they no longer wish to own it. However, in some cases, shareholders may instead want to close the company altogether. For example, if your company has fulfilled the purpose for which it was originally set up, you may wish to close it rather than sell it. Follow this checklist to ensure you complete all relevant steps when closing your private limited company.

Last reviewed 6 October 2022.

A company is solvent if it can pay its debts. If a company cannot pay its debts, it is insolvent. In other words, insolvency is when the company has more liabilities than assets. 

Whether your company is solvent or insolvent will determine how you can close it.

If your company is solvent, consider: 

  1. applying to have your company struck off, or 

  2. passing a resolution of members’ voluntary liquidation

This checklist details the steps for both processes.

Action

(✔) 

1. Apply to have the company struck off

Consider if the company can be struck off. To be struck off, the company must not:

  • have traded within the last 3 months

  • have sold any stock within the last 3 months

  • have changed its name within the last 3 months

  • be threatened with liquidation

  • have any agreements with creditors (eg a company voluntary arrangement)

 

Announce your plans to have the company struck off. Inform all interested parties (eg shareholders, creditors, staff and directors) of your intention to strike off the company.

 

Treat staff according to the relevant rules. Make sure you dismiss staff following the correct redundancy procedures, including paying their final wages or salary.

 

Inform HMRC that you are no longer employing staff. Inform HMRC that you are stopping being an employer and are no longer using PAYE or making National Insurance contributions.

 

Handle business assets. You should distribute all business assets amongst the shareholders (including payments the company may receive in the future - like refunds from HMRC) or otherwise handle them (eg close bank accounts and transfer domain names). 

Any assets not distributed after the company is struck off pass to the Crown.

 

Submit final accounts. Send the company’s final statutory accounts and a Company Tax Return to HMRC. State that these are the company’s final trading accounts as it will be struck off soon.

When submitting your final accounts, you also need to pay all corporation tax and any other outstanding tax.

 

Pay capital gains tax (CGT). If you take any assets from the company before it is struck off, you may have to pay CGT on any of your personal profits.

 

Apply to strike off the company. Complete Form DS01, have it signed by a majority of the company’s directors and send it to Companies House. You will need to pay the applicable fee of £10.

 

Keep records. Make sure to keep records of: 

  • any business documents (eg bank statements, invoices and receipts) for 7 years after the company is struck off

  • the company’s employers’ liability insurance policy and schedule for 40 years from the date it is struck off

 

2. Pass a resolution of members’ voluntary liquidation

Consider if you can pass a members’ voluntary liquidation (MVL). An MVL can be used for solvent companies where:

  • you want to retire

  • you want to step down from the business (eg a family business) and nobody else wants to run it

  • you do not want to run the business anymore

  • the company was set up for a specific purpose or contract and that has been completed, or

  • the company has become outdated and is now redundant

 

For English and Welsh companies, make a declaration of solvency. Make a statement stating that the company directors have assessed the company and believe it can pay its debts, with interest, at the official rate. Include a statement of the company’s assets and liabilities.

The declaration must be signed in front of a solicitor or notary public.

 

For Scottish companies, complete Form 4.25 (Scot). Fill in Form 4.25 (Scot) and sign it in front of a solicitor or notary public.

 

Pass a winding-up resolution. Call a general meeting of the shareholders within 5 weeks of signing the declaration/form and: 

Note that a special resolution, requiring at least 75% of shareholders (by the value of shares) to agree to the winding up, must generally be passed for an MVL. Check your company’s articles of association to see if they set out different special resolution requirements.

 

Advertise the winding-up resolution. You need to advertise the shareholders’ resolution to wind up the company in The Gazette within 14 days.

 

Send the declaration. Within 15 days of passing the resolution to wind up the company, send: 

 

If your company is insolvent, consider:

  1. arranging a creditors’ voluntary liquidation, or

  2. applying for compulsory liquidation

This checklist details the steps for both processes.

Action

(✔) 

1. Arrange a creditors’ voluntary liquidation

Consider asking for a creditors’ voluntary liquidation (CVL). A director can propose that an insolvent company stops trading and is wound up if enough shareholders agree.

 

Pass a winding-up resolution. Call a general meeting of the company shareholders and ask them to vote on the winding-up resolution. 

Generally, a special resolution, requiring at least 75% of shareholders (by the value of shares) to agree to the winding up, must be passed for a CVL. Check your company’s articles of association to see if they set out different special resolution requirements.

 

Appoint a liquidator. The liquidator is an authorised insolvency practitioner who will take charge of liquidating the company and will act in the interest of the company’s creditors.

 

Send the winding-up resolution. Send the resolution to wind up the company to Companies House within 15 days.

 

Advertise the winding-up resolution. You need to advertise the shareholders’ resolution to wind up the company in The Gazette within 14 days.

 

2. Apply for compulsory liquidation

Consider compulsory liquidation. If your company is insolvent, you can apply to the courts for compulsory liquidation if:

  • the company cannot pay its debts of £750 or more, and

  • a winding up resolution is passed

 

Pass a winding-up resolution. Call a general meeting of the company shareholders and ask them to vote on the winding-up resolution. 

Generally, a special resolution, requiring at least 75% of shareholders (by the value of shares) to agree to the winding up, must be passed. Check your company’s articles of association to see if they set out different special resolution requirements.

 

Find out what court to send your application to. This will depend on the amount of paid-up share capital the company has (ie the amount of money the company has been paid from shareholders in exchange for company shares). You can find the paid-up share capital on the Companies House register.

If your company has a paid-up share capital of: 

  • £120,000 or more, you can submit your application online to the High Court

  • less than £120,000, find your nearest court that handles bankruptcies. Depending on the court in question, you can either apply online or by post

See the Government’s website for more information.

 

Complete the relevant forms. Complete Form Comp 1 and send it to the court alongside:

  • Form Comp 2 confirming the details of your petition, and

  • the shareholders’ winding-up resolution

 

Pay the application fee. Submitting the petition costs £1,600, while the court hearing costs another £280.

 

Wait for the court hearing. If the court accepts your petition, you’ll get a date for the court hearing. Before the hearing, you must:

  • provide a copy of the petition to the company and inform the court of this by filling in a certificate of service

  • advertise the proposed compulsory liquidation in The Gazette at least 7 days before the hearing

  • send a copy of the certificate of service and the advert to the court

 

Attend the court hearing. You (or your solicitor) should attend the hearing. If the court grants a winding-up order, they’ll instruct an official receiver to be in charge of liquidating the company.

A copy of the winding-up order will be sent to your company’s registered office.

 

 

Bear in mind that if your company is insolvent, but you do not wish to close it immediately, you can consider putting it into administration. For more information, read Administration.

For more information on closing your company, read Closing a limited company and do not hesitate to Ask a lawyer if you have any questions or concerns.