How to Close Down a Limited Company in the UK

Shutting down a UK limited company demands meticulous planning and strict adherence to legal protocols.

We seamlessly guide you through the essential steps to close your limited company in accordance with UK law and mitigate risks.

What Does It Mean to Close Down a Business?

Closing down a business involves permanently ending its operations and dissolving the legal entity. This requires completing all necessary steps to ensure that the business is no longer active and is removed from the Companies House register. This typically includes paying off all debts, disposing of business assets, and complying with all legal requirements

Closing A Limited Company

Three Pathways to Company Closure

In the UK, there are three primary methods for dissolving a company: Strike Off, Members’ Voluntary Liquidation (MVL), and Liquidation. Each method has its own set of requirements, costs, and implications, and the choice depends on the specific circumstances of the company.

Strike Off:

A straightforward and cost-effective option for dormant companies with no outstanding debts. This process involves removing the company from the Companies House register, making it legally inactive. It is generally quick and inexpensive but does have certain limitations, such as the company not having traded in the last three months.

Members’ Voluntary Liquidation (MVL):

Suitable for solvent companies that can settle their debts but have decided to cease operations. MVL is often chosen for strategic reasons like retirement or business transformation. It involves a formal winding-up process, where the company’s assets are distributed among the shareholders after settling outstanding debts. While more time-consuming and expensive than Strike Off, MVL offers tax advantages.


The most complex and expensive method, reserved for insolvent companies that are unable to pay their debts. Liquidation involves selling off the company’s assets to settle debts and formally dissolving the business. It can be either voluntary, initiated by company directors, or compulsory, imposed by the courts. Liquidation is the most time-consuming and expensive option, but it ensures that creditors are repaid as much as possible.

The method chosen for dissolving a company should carefully consider the company’s solvency, business complexity, and the specific reasons for closure. Each option has its own set of considerations, and consulting with a qualified professional is recommended to ensure a smooth and compliant closure process.

What are the  methods of closing a business?

Striking off a limited company from the Companies Register provides a straightforward and cost-efficient means of winding down a solvent and non-trading company. This option is frequently chosen by small business owners embarking on retirement or exploring new opportunities.

Factors Determining Company Strike-Off Eligibility

To be eligible for strike-off, your limited company must meet the following criteria:

  • It must not be actively engaged in business operations and must have refrained from trading for the past three months.
  • It must have no outstanding financial obligations, including those owed to HMRC, suppliers, or employees.
  • It must not be involved in any ongoing legal disputes or proceedings.

Submitting an Application to Companies House

Following the verification of your company’s eligibility, initiate the striking-off process by submitting an application to Companies House either electronically or via postal mail. A nominal fee is applicable, and you will be required to furnish essential details, including the names of directors and shareholders.

Public Notice in the Gazette

Upon successful receipt and acceptance of your application, Companies House will publish a legal notice in the Gazette, the official public record of the United Kingdom, where all legal notices are disseminated. This notice serves to inform the public and potential creditors that your company is undergoing the striking-off procedure.

Waiting Period and Objections

Following the publication in the Gazette, a two-month waiting period ensues during which objections to the company’s striking off may be raised. If any objections are received, they must be resolved before the striking-off process can proceed.

Receipt of Dissolution Notice

Upon successful completion of all the aforementioned steps and in the absence of any objections, Companies House will formally strike off your company. You will then receive a notice of dissolution, officially confirming the closure of your company and its subsequent termination from existence.

Members Voluntary Liquidation

An MVL is a formal procedure for dissolving a solvent company, meaning it possesses sufficient assets to discharge all its debts. It is most suitable for companies with assets worth at least £25,000.

A significant advantage of closing a company via MVL is the potential for tax savings. When a company undergoes voluntary liquidation, any distributions to shareholders are considered capital gains rather than income. This translates to taxation at a lower rate, particularly for high-rate taxpayers.


Setting the Stage for Winding Down

The Members’ Voluntary Liquidation (MVL) process commences with a shareholders’ resolution, where directors affirm the company’s solvency – its ability to settle all financial obligations within a year. This resolution signifies the official initiation of the MVL.

Bringing in a Liquidator

A crucial step in the MVL entails appointing a licensed insolvency practitioner (IP) to assume the role of liquidator. The IP presides over the entire liquidation process, including asset disposal and tax-efficient distribution of proceeds to shareholders.

Notifiying Stakeholders

As part of the MVL procedure, the liquidator sends formal notifications to creditors, providing them an opportunity to submit any outstanding claims. This ensures transparent and lawful addressing of financial obligations.

Realizing Assets and Redistributing Wealth

The liquidator proceeds to realize and sell the company’s assets, converting them into cash. The acquired funds are then distributed among shareholders based on their entitlements. This phase is meticulously executed to optimize returns while adhering to taxation regulations.

Bringing Down the Curtain

Once all assets have been distributed and financial matters resolved, the liquidator applies for the company’s dissolution. This formalizes the closure, removing it from the Companies House register and marking the completion of the Members’ Voluntary Liquidation process.

Creditors’ Voluntary Liquidation (CVL)

Creditors’ voluntary liquidation (CVL) is a formal method for closing a debt-ridden company. It’s a suitable choice for insolvent companies seeking to avoid compulsory liquidation, a court-mandated winding-up process.

Initiating the CVL Process

The journey toward a CVL commences with a formal decision to wind up the company. This resolution must be adopted at a general meeting of shareholders, with at least 75% of the shareholders voting in favor. This step marks the beginning of the formal liquidation process and is a prerequisite for proceeding with a CVL.

Engaging a Licensed Insolvency Practitioner

Following the resolution’s passage, the next crucial step involves appointing a licensed insolvency practitioner (IP) to serve as the liquidator. The liquidator plays a pivotal role, overseeing the company’s closure, valuing and selling its assets, and managing creditor payments.

Public Announcement of Liquidation

Upon appointing the liquidator, it is mandatory to publish a notice of liquidation in The Gazette. This step serves as a critical communication channel, informing creditors, suppliers, and other stakeholders of the company’s status and impending liquidation.

Settling Debts with Creditors

The liquidator will then proceed to sell off the company’s assets and utilize the proceeds to settle outstanding debts. Creditors are paid in a predetermined order, typically starting with secured creditors. Adherence to this sequence is essential to comply with legal requirements.

Company Dissolution and Finalization

After settling all debts and fulfilling any remaining legal obligations, the liquidator will apply to have the company dissolved. This marks the final step in the CVL process, signifying the official termination of the company’s existence.


Closing a Limited Company That Has Never Traded

Dissolving a limited company that has never commenced operations can be achieved through a simplified process known as voluntary strike-off. While straightforward, this procedure necessitates adherence to specific steps.

1. Resolution to Strike Off the Company

A general meeting of shareholders must convene to unanimously approve a resolution to strike off the company.

2. Completing and Submitting Form DS01 to Companies House

Form DS01, signed by all company directors, must be submitted to Companies House.

3. Payment of Filing Fee to Companies House

The current filing fee of £10 must be paid to Companies House.

4. Company Removal from Companies House Register

Upon processing the application, Companies House will strike off the company from the register, effectively terminating its existence.

Seeking Professional Guidance

If uncertainties arise regarding the eligibility for voluntary strike-off or assistance with form completion is required, consulting an accountant or solicitor is advisable.


Closing Costs for Limited Companies

Terminating a limited company’s existence in the UK involves a range of expenses, which can vary depending on the chosen closure method, company size, and specific circumstances. It’s crucial to factor in these costs when planning to dissolve your company. Here’s a breakdown of the key expenses associated with closing a limited company:

Professional Guidance

Seeking professional assistance from an accountant, solicitor, or insolvency practitioner is essential during the liquidation process. Their expertise ensures adherence to legal requirements and smooth closure, but their services come at a cost.

Companies House Fees

Companies House charges for processing closure applications. The fee varies based on the closure method. For instance, there’s a fee for applying for voluntary strike-off or registering a Members’ Voluntary Liquidation (MVL).

Insolvency Practitioner Involvement

If opting for insolvency procedures like Creditors’ Voluntary Liquidation (CVL) or Company Voluntary Arrangement (CVA), engaging an insolvency practitioner is mandatory. Their fees must be factored into the closure process.

Employee Redundancy Costs

Companies with employees may face redundancy costs when closing down. These include statutory redundancy pay, notice periods, and holiday pay.

Settling Outstanding Debts and Liabilities

Before dissolving the company, all outstanding debts and liabilities must be resolved. This may involve settling creditors, suppliers, or outstanding loans, which can incur costs.

Taxation Implications

Closing a company may have tax implications. Corporation Tax on any profits or Capital Gains Tax on asset sales may apply. Engaging a tax professional to handle these matters may incur additional costs.

Asset Valuation

If assets are to be liquidated or transferred during the closure, the cost of valuing these assets should be considered.

Document Filing Costs

Filing the necessary paperwork with Companies House and other relevant authorities may incur costs.


Converting Your Company to Dormancy

Transitioning your company to a dormant status entails maintaining its registration with Companies House while halting active trading and income generation. Dormant companies are still bound by certain legal obligations, but they have fewer responsibilities compared to operational companies.

Several motivations may prompt a company owner to opt for dormancy. They may plan to resume trading in the future or simply desire to preserve their company’s name and registration.

To transform your company into a dormant entity, follow these steps:

  1. Notify HMRC of your company’s dormancy status. This can be done online or via telephone.

  2. Submit your dormant company’s financial statements to Companies House. This can be accomplished online or through traditional mail.

  3. File an annual confirmation statement with Companies House. This can be done online or through traditional mail.

If your company conducts any significant transactions during the year, it will no longer be considered dormant, and you will be required to file standard company accounts and tax returns.

Converting Your Company into Dormancy

Legal Obligations When Closing a Limited Company

When shuttering a limited company, several legal considerations must be addressed to ensure a smooth and compliant dissolution process. These key aspects include:

  1. Compliance with Company Law: The closure procedure must adhere to the legal framework outlined in the Companies Act 2006. This encompasses notifying Companies House appropriately, following specific procedures based on the chosen method of closure, and fulfilling all obligations towards creditors, shareholders, and employees.

  2. Directors’ Duties and Liabilities: Company directors have a legal responsibility to act in the best interests of the company’s stakeholders. During the dissolution process, directors must ensure that all outstanding debts and liabilities are settled and that creditors are duly notified. Neglecting these duties could result in personal liability for the company’s debts.

  3. Employee Redundancy and Rights: If the company employs individuals, specific legal procedures must be followed when terminating their employment contracts. This entails providing adequate notice periods, settling outstanding wages, and addressing redundancy entitlements in accordance with employment laws.

  4. Creditors’ Rights: Creditors have a legal right to be informed of the company’s closure and to receive any outstanding payments. Directors must ensure that all creditors are notified promptly and that debts are settled in full during the dissolution process.

  5. Intellectual Property and Assets: The company’s intellectual property rights and assets must be handled responsibly during closure. Intellectual property rights may need to be transferred or protected, and company assets should be liquidated or distributed according to legal guidelines.

  6. Shareholders’ Agreements and Disputes: If the company has multiple shareholders, their rights and interests must be considered during the dissolution process. Shareholders’ agreements, if applicable, should be reviewed to address any issues related to shareholding and distributions.

  7. Legal Documentation: Comprehensive legal documentation is essential to formalize the company’s closure. This includes resolutions from directors and shareholders, as well as any agreements with creditors or insolvency practitioners, depending on the chosen method of closure.

  8. Tax Compliance: Closing the company may have tax implications, as outlined in the Tax Implications section. Ensuring tax compliance is a crucial legal obligation to avoid potential penalties from tax authorities.

Navigating the legal intricacies and responsibilities of closing a limited company can be challenging. Seeking guidance from legal professionals, insolvency practitioners, or business advisors can significantly enhance the dissolution process and ensure compliance with all legal requirements.

Can I Start a New Company After Closing My Current One?

Yes, you can establish a new business as long as you comply with all Companies House regulations.

However, Her Majesty’s Revenue and Customs (HMRC) is particularly concerned about the practice known as “phoenixing,” in which a liquidated company resurfaces under a new limited company structure with the same or a similar name.

This is forbidden by Section 216 of the Insolvency Act. For instance, you cannot reuse the same company name.

How Long Does It Take to Close a Company?

If the company is simply being struck off the Companies House register, expect the process to take around three months before you receive confirmation.

Liquidation will likely take much longer, especially if there are assets to dispose of.

Seek Assistance if You Need Help Closing Your Limited Company

If you require assistance in voluntarily liquidating your company or are concerned about receiving a winding-up petition from a secured creditor or HMRC, contact Vanguard Insolvency Practitioners as soon as possible.

We can assist you in seamlessly winding up your business or take swift action to prevent compulsory liquidation.

FAQs about Company Closure

A company can be closed permanently through Creditors’ Voluntary Liquidation (CVL), a process where the directors voluntarily wind down the business. A licensed insolvency practitioner must be appointed to oversee the CVL and ensure equitable treatment for all creditors.

In the event of voluntary company closure, directors are mandated to convene a general meeting for the adoption of a winding-up resolution, designate a liquidator to handle the company’s affairs, and inform Companies House within 15 days of the resolution’s passage.

Before embarking on a company closure, it’s crucial to assess outstanding debts, inform all stakeholders, ensure all company taxes and reports are current, and evaluate the potential impact on employees.

To revive a defunct company, a court application seeking a restoration order is mandatory. This necessitates presenting evidence detailing the reasons for the company’s dissolution and demonstrating compliance with the restoration criteria, along with settling any outstanding debts or fulfilling any pending filing obligations.

There are a number of steps that companies can take to avoid a winding-up petition. These include maintaining transparent financial records, communicating openly with creditors, and seeking professional advice if financial difficulties arise. Companies may also consider alternative solutions such as a Company Voluntary Arrangement (CVA).

Directors who neglect to follow proper procedures during company closure may face legal and financial repercussions, including personal responsibility for company debts, fines, or disqualification from future directorship roles.


The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.

You can learn more about our standards for producing accurate, unbiased content in our editorial policy here.

Trusted Source – .GOV – HMRC as a Preferential Creditor