Our Guide to Closing a UK Limited Company

There are many reasons why you may need to close down a limited company. You may need to dissolve a company because it has run out of money, you may have decided to retire, or the business may no longer be viable. To close your UK limited company properly, you will need to follow the required steps to ensure your legal compliance and avoid complications with HMRC and Companies House. In this guide, we will explain all you need to know about closing a UK limited company, including strike-off and liquidation, in accordance with the latest regulations.

What are the main methods of dissolving a company?

As we will set out in this guide, there are several ways of dissolving a limited company in the UK, as summarised in the following table:

Method	Description
Voluntary Strike-Off	Suitable for solvent companies that have ceased trading.
Members’ Voluntary Liquidation (MVL)	Used for solvent companies with assets to distribute to shareholders.
Creditors’ Voluntary Liquidation (CVL)	Chosen by insolvent companies that can no longer pay their debts.
Compulsory Strike-Off	Initiated by Companies House for companies failing to file returns.

Each method has its own pros and cons, process, and costs, which should be understood by company directors before the company closes down.

Applying for a voluntary strike-off

Voluntary strike-off is a common and relatively easy way to dissolve a limited company that is no longer trading and has no debts. Applying to have your company struck off means that it will be removed from the official register of companies held and maintained by Companies House. This method of closing a company is cost-effective, with an online application fee of £33 (digital application) or £44 (paper application).

Criteria for voluntary strike-off

For a company to be struck off, it must:

• Not have traded or sold any assets within the last 3 months.
• Not be actively involved in legal proceedings. 
• Not have unpaid creditors or be under a Company Voluntary Arrangement (CVA). It is essential to ensure that all tax liabilities, including VAT, corporation tax, and PAYE, are cleared before applying to strike off. Failure to do so may result in objections from HMRC.

How to apply for voluntary strike-off

The process of applying to strike off your company from the Companies House register can be completed easily and quickly online. The following are the key steps that must be taken:

• The company directors must complete and submit form DS01 to Companies House. The form must be signed by a majority of company directors. To complete this form online, you will need to sign in to or create a Companies House account and provide your company number, company authentication code, and an email address for each person signing the application.
• Pay the application fee of £33 if applying online or £44 if applying by post.
• Notify all shareholders, creditors, and employees of the intention to strike off.
• If Companies House are satisfied that you have a valid application, they will include your strike-off request in *The Gazette to notify others of your intentions. 
• Wait for Objections, and
• If no objections are raised within 3 months, the company will be dissolved by Companies House. A final notification that your company has been dissolved will also be included in The Gazette.

*There are 3 separate gazettes: the London Gazette for companies incorporated in England and Wales, the Edinburgh Gazette for companies incorporated in Scotland, and the Belfast Gazette for companies incorporated in Northern Ireland.

Once your company has been struck off, your company’s bank account will be frozen. Any remaining balance held in the account and other assets will then pass to the Crown.

Members’ Voluntary Liquidation (MVL)

If your company is currently solvent, a Members’ Voluntary Liquidation (MVL) will allow you to wind it up and distribute the remaining assets to shareholders. 

Criteria for Members’ Voluntary Liquidation (MVL)

The MVL route is normally chosen by those who:

• Want to retire
• Step down from the family business (and nobody else wants to run it), or 
• Do no longer wish to run the business. 

How to apply for a Members’ Voluntary Liquidation (MVL)

Unlike a simple strike-off application, an MVL is a much more formal process that involves appointing a licensed insolvency practitioner to oversee the liquidation. To apply for an MVL, the following steps must be taken:

• Declare that the company can pay all its debts within 12 months (this is a ‘declaration of solvency’). This involves drafting a statement confirming that the directors have assessed the company and believe it can pay its debts with interest at the official rate. 
• Appoint an insolvency practitioner to handle the sale of any business assets, and
• The liquidator will ensure that all creditors are paid before distributing any remaining funds to shareholders​.

Creditors’ Voluntary Liquidation (CVL)

A Creditors’ Voluntary Liquidation (CVL) offers another way of closing a UK limited company and is typically used when a company is insolvent and can no longer pay its debts. In this case, the company’s directors voluntarily decide to wind up the company, with a liquidator overseeing the sale of assets to pay creditors.

Criteria for Creditors’ Voluntary Liquidation (CVL)

A CVL is typically utilised if:

• The company cannot pay its debts, and
• There is an agreement of at least 75% (by value) in the form of a resolution of the company shareholders to liquidate the company.

How to apply for a Creditors’ Voluntary Liquidation (CVL)

As with an MVL application, there are several steps involved in applying for a CVL, as follows:

• The company’s directors must first hold a meeting with creditors to explain the company’s financial situation
• Creditors appoint an insolvency practitioner to handle the liquidation
• The company will be closed in an orderly manner, and
• The appointed liquidator will secure and realise any assets that the company owns for the benefit of company creditors, report on the reasons for the company’s insolvency, review the conduct of the directors and submit a conduct report to the Insolvency Service.

Compulsory Strike-Off

A compulsory strike-off occurs when Companies House starts the process of dissolving a company because it has become inactive or it has not met its filing requirements. This may happen, for example, if any annual accounts or confirmation statements have not been submitted. Company directors can avoid a compulsory strike-off by ensuring that all annual returns, accounts, and confirmation statements are submitted to Companies House. In addition, they should keep up with tax payments and communicate with HMRC to avoid objections.

When the company is struck off, it no longer legally exists, and any remaining assets become the property of the Crown. Directors may have to apply for administrative restoration if they wish to recover any assets​.

Meeting your tax obligations when closing your company

When closing down a limited company, it is important that you clear any outstanding tax liabilities. As such, directors must ensure that all taxes, including VAT, corporation tax, and PAYE, are paid in full before the company is dissolved. HMRC will require you to submit your final accounts and a corporation tax return and deregister the company for VAT once trading has stopped. In addition, any outstanding payroll taxes must be paid in full​.

Failure to meet these obligations could lead to objections from HMRC and delay the dissolution of your limited company.

Informing stakeholders of your intention to dissolve the company

Before you submit your application to dissolve your company to Companies House, you must inform all stakeholders of your intention to dissolve. This includes all of your shareholders, creditors, employees, and any others with an interest in the company’s activities.

The rules state that company creditors must be informed at least 7 days before submitting the DS01 form to Companies House. Your company employees should also be made aware of any redundancies and provided with any entitlements that they are legally owed​.

Administrative Restoration

If your limited company has been struck off the Companies House register in error, or if you need to restore a company to access the assets of the business, you can apply for ‘administrative restoration’. 

Criteria for Administrative Restoration

You can only apply to Companies House to get your company restored if:

• You were a director or shareholder of the limited company you want to restore to register
• The company was struck off the register and dissolved by the Registrar of Companies within the last 6 years, and
• It was trading at the time it was dissolved

If any of the above do not apply, you may require a court order to get your company restored.

To restore your company, you will need to:

• Submit a completed application for administrative restoration (form RT01)
• Provide a cheque for £468
• Provide any outstanding documents, such as company accounts or confirmation statements (previously annual returns)
• Pay any filing fees or penalty payments
• Provide a waiver letter from Bona Vacantia if your company had assets. 

Settling any outstanding debts of the company

Before dissolving a company, it is vital that you settle any outstanding debts. As such, directors should ensure that any remaining funds or assets are used to pay creditors. 

This includes paying off any suppliers or lenders, as well as HMRC, for taxes such as VAT and corporation tax. If debts remain unpaid, creditors may object to the strike-off or liquidation, causing delays or even legal action. Directors should ensure that the company’s accounts are fully in order, and any remaining funds or assets should be used to clear these liabilities before applying for dissolution​. 

Unpaid debts may lead to legal action or compulsory liquidation.

Distributing assets

Once your company’s debts have been cleared, any remaining assets can be distributed to shareholders. This process is typically managed by a liquidator in the case of liquidation. 

If a company is struck off without distributing its assets, those assets become the property of the Crown under the ‘Bona Vacantia’ rule. To avoid this, directors should ensure all assets are distributed before applying for strike-off​. 

Final words

Closing down a limited company in the UK property means following the correct procedures, settling any debts, and complying with the tax rules. Due to the complexity of closing down a limited company, it is absolutely essential to seek professional help from a licensed insolvency practitioner or company law Solicitor before embarking on the closure of your company. Not only will they ensure that your company is closed according to the law and rules, but they will also protect your interests, ensure compliance with the relevant laws, and avoid any problems.

Uniwide Formations specialises in the registration of limited companies and LLPs. As professional business service providers, we offer a wide range of related services and can advise you on all aspects of the voluntary dissolution of a company. To discuss any of the points raised in this article, please get in touch with us.