Can I wind up my own company?

What’s the most appropriate closure method for my business?

Sometimes, closing your own company can be the cheapest option. It’s known as Voluntary Dissolution. After you’ve stopped trading and settled debts, you can request to remove your company from the official register at Companies House. 

If your company meets the criteria and there are no objections, it will be struck off and no longer exist.

While Voluntary Dissolution is straightforward and affordable, it may not always be the best option for closing a company. Other methods might be more suitable if you have substantial cash reserves or assets to distribute to shareholders, or if the company is insolvent.

 

How can Voluntary Dissolution help to wind up my company?

If your limited company is solvent and hasn’t traded, changed names, or sold any property rights in the last three months, you can apply to wind it up. 

The online process costs only £8. If you’re unable to apply online, you can send the paper form DS01 to Companies House, along with a £10 fee.

Companies House will review all your details for accuracy, and if you meet the necessary criteria, your company will be removed from the register approximately three months later.

The bulk of the work happens before you apply. You need to ready your business for closure by settling debts with creditors, notifying all relevant parties (employees, shareholders, and clients), submitting statutory accounts and tax returns to HMRC, and closing the company’s bank accounts. 

Additionally, you must sell or transfer the company’s assets before applying for strike-off.

 

Is it possible to wind up a company if it has remaining debts?

Voluntary Dissolution isn’t suitable if your company has unpaid debts. Even though your application won’t be rejected outright, you must notify your creditors of your intention to dissolve the company, and they have the right to object.

If objections arise, the process halts, allowing creditors to pursue debt collection. Even if there are no objections and the company dissolves, creditors can still petition the court to reinstate the company at any time in the future.

There’s a risk of investigation if your actions imply an attempt to avoid repaying creditors. Consequently, you might face fines, personal liability for company debts, or disqualification from future directorship roles.

 

What are the procedures for winding up a company with debts?

If your company is unable to repay its debts (insolvent), you can opt for a Creditors’ Voluntary Liquidation (CVL) to close it properly. This process begins by appointing an insolvency practitioner to serve as the liquidator.

The appointed insolvency practitioner will sell the company’s assets and distribute the proceeds to the creditors. Subsequently, they will proceed to close the company, and any outstanding debts will be discharged.

While you are required to pay a liquidator’s fee, one often underestimated advantage of a CVL is the potential eligibility to claim a director’s redundancy pay. 

This compensation could exceed the liquidation costs and offer a financial cushion as you contemplate your next career move.

 

Unlocking the most tax-efficient way to wind up a company?

If your company possesses cash reserves and assets exceeding £35,000 after settling all liabilities, opting for a Members’ Voluntary Liquidation (MVL) is probably the most economical method to cease its operations.

To begin an MVL, you appoint a licensed insolvency practitioner as the liquidator. Their responsibilities include repaying creditors, selling the company’s assets, distributing proceeds to shareholders, and ultimately closing down the company.

The advantage of an MVL compared to Voluntary Dissolution is that the proceeds withdrawn from the company are liable to Capital Gains Tax. Furthermore, you might qualify for Business Asset Disposal Relief, resulting in a mere 10% tax on qualifying assets.

In contrast, under Voluntary Dissolution, the proceeds are regarded as income and subject to taxation at a substantially higher rate.

 

Read More: 

• What happens when a Winding Up Order is made
• How can a Winding Up Petition be set aside
• My business bank account has been frozen – what can I do
• Understanding a Creditor’s Petition and the process that follows
• Statutory Demands  Advice for Company Directors

 

We’re at help! 

If you’re considering winding up your limited company but are uncertain about the process, we’re here to assist. 

We’ll outline the most suitable procedure for your situation and provide guidance on the correct steps to take. Feel free to reach out for a complimentary, same-day consultation or schedule an in-person meeting at one of our 100+ offices across the UK.