Reasons when Closing a UK-based Company
There are several reasons why you may want to close your company. You may be leaving the UK and moving to another country, or you may be retiring and want to take a break from it all.
Whatever the case, you are required to have the agreement of the company’s directors or shareholders to close a limited liability company. How you close a limited liability company depends on whether you have bills to pay, are in debt, or don’t owe any suppliers, businesses, or individuals.
If the company is considered solvent, you may apply to strike off the company from the UK register of Companies. As a director, you can equally start what is known as members’ voluntary liquidation. Remember that the cheapest way to strike off a company is to close it.
In the event that the company can’t pay its bills, the money owed to other individuals, businesses, or third parties legally comes before that owed to the board of directors or shareholders.
Under such circumstances, you must liquidate your company, or you may be forced to liquidate it by regulators or the competent authority. If you apply for a voluntary company arrangement, you will be able to avoid liquidation.
How about a Scenario where there is no Director?
In the event that a director has passed away due to unforeseen circumstances, you can appoint a new director. This is required in order for you to effectively strike off a company from the UK register of companies.
It may be more challenging to manage the company’s assets in such an event, especially if the managing director has passed.
Under such circumstances, shareholders must agree to appoint a new director who will manage the winding down of the business in question. They may equally need to vote on the person in question.
Remember that the estate’s executor can appoint a director, which does not require a vote as long as the company’s articles allow for that if the sitting director passed away.
The appointed director can close a company but must ensure that they pay corporation tax and file a tax return with HMRC even if there is no director.
Making the Company Dormant
You do not have to close your company if it is dormant or it is no longer trading. You can leave it open as long as it can carry out its business functions, maintains trading activities, or receives income.
Under such circumstances, your company may still be registered at the company’s trading house. In such a case, you still need to send your annual accounts and confirmation statements to the relevant authority or Companies House.
Remember that you do not always have to close a dormant company; you can keep it dormant for as long as you want.
Putting Your Company into Administration
If your company cannot repay its debts, you can put it into administration. In such a circumstance, you are protected from legal action. Nobody can help you with the process of winding down your company if it has not repaid its debts in full.
However, administration means that your company does not have to repay its debts immediately.
Appointing an Administrator
As a company, you may appoint an administrator who must be a professional insolvency practitioner. You will have to pay some fees if you choose such an option.
How Exactly Does Administration Work?
The chosen administrator will first begin by writing a letter to all your creditors and Companies House to notify them of the appointment. They’ll equally publish this in the Gazette.
After this, your administrator will try to stop your company from being wound up or liquidated and then try to pay much of your debts from your assets. The appointed administrator has eight weeks to come up with the statement of intent.
During the period where your company is in administration, the administrator in question will run your business as they have control over your affairs.
Frequently Asked Questions
How to declare insolvency?
Write a statement that says the companies’ directors cannot pay their debts with the current interest rate. Be sure to include the name and address of the company and how long you may take to pay such debts a year before liquidation.
What are the three types of liquidation?
There are three types of liquidation, which are creditors, compulsory, and members’ voluntary liquidation.