Company Closure
The three main company closure options and what you need to know
1. Strike Off
Striking off a company is an informal way of bringing an end to an unwanted business. The process is sometimes known as dissolving a company, and involves directors submitting a DS01 form and informing the relevant parties. Strike off is only suitable for those companies without any outstanding debts. If you do have debts and attempt to strike the company off, you should expect a creditor to lodge an objection which will see the process halted. Strike offs are increasingly being rejected, particularly those which have outstanding Bounce Back Loans.
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2. Creditors’ Voluntary Liquidation (CVL)
A CVL is a formal insolvency process which involves a licensed insolvency practitioner placing an insolvent business into liquidation. Your company is classed as insolvent if its debts (including Bounce Back Loans) outweigh its assets, and when you can no longer keep up with your monthly liabilities as and when they fall due. Closing your company through a CVL opens up the possibility of redundancy pay which may come in useful during this time.
(Remember, your company being solvent means also being able to pay all its obligations including you as an employee. If it is not able to pay you or any other employee, and this obligation coupled to its other debt burden effectively equals its debts outweighing its assets then it is not a solvent entity.)
There is a cost for this service that must be paid in advance. This is between £5,000 and £8000 depending on the complexity of the company’s affairs. Paying this amount upfront to close your failing company, should be considered against both the immediate and long-term debt repayment savings you are likely to gain by closing the business via the CVL.
What if my company has debts?
If your company is insolvent and you would like to bring it to an orderly end, opting for formal liquidation through a CVL is likely to be the best solution. Once a business has been liquidated, it ceases to exist as a legal entity and any debts which remain outstanding including Bounce Back Loans can no longer be chased (unless these have been secured with a personal guarantee).
Upon your insolvent company entering liquidation, you may be entitled to claim director redundancy. If you take a salary through PAYE (even if this is topped up with dividends), it is highly likely that you are classed as an employee of the company and therefore able to claim redundancy if the business closes. The amount you may be entitled to will depend on a number of factors including your length of service, hours worked, as well as the salary you were paid during this time, however, the average amount claimed is £9,000.
We provide free and impartial advice and all calls are confidential
3. Creditors’ Voluntary Liquidation (CVL)
If your company is solvent, and has in excess of £25,000 in assets, it is highly likely that closing the company using an MVL will be more cost-effective and tax-efficient than simply applying to strike off the business. Cash extracted from a business via an MVL is treated as capital gains rather than income and taxed accordingly. You can also benefit further if you qualify for Business Asset Disposal Relief (formally known as Entrepreneurs’ Relief) which halves the effective tax rate down to just 10%.
We provide free and impartial advice and all calls are confidential
Winding Petition
For your Information it is useful to understand how your business can be challenged by a creditor seeking to close it down.
A winding up petition (WUP) is the legal mechanism by which a business creditor, who must be owed over £750, starts the court process to wind up a company for non-payment of debts. A winding up petition can only be issued if the debtor has received and ignored a statutory demand served at least 21 days ago, or the creditor has a court judgment against the debtor.
A winding up petition can result in compulsory liquidation, which will mean an official receiver (an officer of the Insolvency Service) begins the process of formally closing the company and selling off any assets.
The most common situation where a Winding up Petition is served is where debts are owed to HMRC.
If a creditor of a company has done everything it can to get the company to pay the money it owes, it is possible to get it wound up on the grounds that it can’t pay its debts. Clearly, given the severity of the repercussions, this should only be used as a last resort, but in some circumstances, it is necessary to prevent the company from accruing further debts.
To wind up a company it be must forced in to compulsory liquidation, which is done by presenting a winding up petition to the court. The court will then hear the petition, and if it agrees that the company should be wound up, it will make a winding up order and the company will be liquidated. The assets of the company will be sold and the money raised will be distributed to the company’s creditors.
Where can I get further advice?
If you are considering closing your company, it is vital you understand your options and choose the route which is most appropriate for your company and its circumstances. Making the wrong choice could open you up to claims of wrongful trading, excluding you from redundancy pay, and even risks the company being reinstated at a later date.
Enlisting the expertise of a licensed insolvency practitioner for the company’s closure will not only ensure you are adhering to your legal responsibilities as the director of a limited company, but also treating all outstanding creditors in a fair and equal way.
How We Can Help
We ensure all legal and tax obligations are met, including filing final accounts, VAT returns, and Corporation Tax.
✅ Creditor Management:
We’ll help you manage outstanding debts and negotiate with creditors to protect your interests.
✅ Employee Support:
From redundancy calculations to final payroll, we’ll guide you through your obligations to your team.
✅ Asset Distribution:
We’ll assist in valuing and distributing assets in line with legal requirements.
Our team handles the paperwork, deadlines, and complexities, so you don’t have to.
Why Choose Us
Expertise:
With years of experience in company closures, we’ve helped countless businesses navigate this process seamlessly.
Compassion:
We understand the emotional toll of closing a business and provide support every step of the way.
We work quickly and diligently to minimise costs and delays.
You can trust us to handle the details while you plan for the future.
Don’t Let the Process Overwhelm You
Time is critical when closing a business. The sooner you act, the more control you’ll have over the process. Call us today to get started!
We provide free and impartial advice and all calls are confidential
