Top tips for your business this new year, use this chance to grow your business, don't repeat mistakes and take...
Company Dissolution, or winding up is the simplest way to close an unneeded company. There are a number of reasons why you might want to close a company. Perhaps you set it up for a purpose which no longer exists, maybe you registered it with the intention of starting a business and then never did so, or perhaps you simply want to close down its affairs one and for all rather than step down and appoint a successor.
A company that’s registered at Companies House is, for all intents and purpose still in existence even if it isn’t trading and the opposite is true, a company which has been removed from the register has ceased to exist and as such can no longer trade. Company Dissolution can be used to close a company by asking for it to be struck off the register of companies, this is only suitable in limited circumstances and can be done without an Insolvency Practitioner.
There are a number of ways a company may find itself struck off, failure to meet the deadlines for filing statutory paperwork being the most common, but for companies which are no longer trading, owe no money and have no outstanding affairs, it’s possible to seek company dissolution simply by filling in a form, allowing you to close down an unneeded company the right way.
How do I Close my company via Company Dissolution?
If the company dissolved has not traded in the last three months then you’re able to fill in a DS01 form and request company dissolution from Companies House. There are a a few additional steps first though;
- Make sure all creditors have been paid in full, or ensure outstanding debts can be paid. This includes employees and also HMRC in the form of VAT, corporation tax, National Insurance contributions etc.
- Once this has been done, HMRC should be informed that the company will no longer need the payroll scheme or VAT registration (if appropriate).
- Close any bank accounts registered in the company’s name.
- Distribute the value of the realised assets to the shareholders. It’s important to do this before submitting the request for company dissolution, as once this is submitted any remaining assets become property of the crown.
Once the application to dissolve your company is registered with Companies House, you have 7 days to advise HMRC and any other party with an interest in the company of the decision to dissolve. Once the company has been successfully struck off, it ceases to exist, you will however have to keep its records for the following 7 years.
What to I need to know about Company Dissolution
Attempting to dissolve a company to avoid debt is never a good idea, but it doesn’t stop people trying. From the point of applying for dissolution, anyone at all can object to the company being dissolved over the following 3 months and if the objection is upheld the dissolution will be stopped. Even if the dissolution does go through, any creditor or shareholder can apply to have the company reinstated to the register at any time over the next 20 years. Added to this, where the dissolution has been misused, there’s the potential for penalties such as fines, Director disqualification or even imprisonment.
Company Dissolution is a fairly straighforward way to close down a company that will no longer be needed, has no outstanding obligations and either few or no assets to distribute. To close solvent companies with more complicated affairs or more assets to distribute, liquidation via a Members Voluntary Liquidation is a more proper and more tax efficient way to proceed than through company dissolution. An MVL is a formal procedure and as such, will require a Licensed Insolvency Practioner to make the arrangements.
if you’re unsure whether company dissolution or an MVL is a more suitable option for you then why not contact us for a free consultation and we’ll be able to advise you further.