Forming a company is a simple process which can be completed within a matter of hours using an online company formation agent like as 1st Formations. Dissolving a company, on the other hand, can be an incredibly complex and confusing process without professional advice.
With that in mind, we have gathered all of the information you need to know about the process and the different methods you can use to close your limited company, including costs, permissions, timescales and a whole lot more.
Consult our handy contents guide below and click the section of interest to jump straight to it. If you have any further questions, just leave a comment below and we’ll do our best to help!
- Do I have to contact HMRC if I want to dissolve my company?
- Do I need to tell HMRC my company has been dissolved if it never traded?
- How do I close (dissolve) a limited company?
- How long does it take to dissolve a company?
- Can I re-open a previously dissolved company?
- How much does it cost to dissolve a limited company?
- What permissions do I need to dissolve my company?
- Can anyone object to a company being wound up?
1. Do I have to contact HMRC if I want to dissolve my company?
If you decide to close your limited company, you must apply to Companies House to have it voluntarily wound up and struck off the register. You should take into account any outstanding debts that are due to be paid by or to the company before doing so, and close down all business bank accounts thereafter. You should notify HMRC that your company has ceased trading and is ‘inactive’ (dormant) for corporation tax purposes.
Business assets should be transferred out of the company’s ownership and shared amongst the shareholders before the company is struck off. If you don’t do this, any assets owned by the company at the date of dissolution will pass into the ownership of the Crown. To apply to Companies House to close a company, it must meet all of the following requirements:
- Not have traded or carried on any kind of business within the last 3 months.
- Not changed its name within the last 3 months.
- Is not subject to any proposed or current legal proceedings.
- Has not made a disposal for value of property or rights.
If you satisfy all of the aforementioned requirements, Companies House will provide you with Form DS01 ‘Striking-off application’. This must be completed with the company name and registration number (CRN), and the names and authorising signatures of a majority of the appointed directors. The form should be filed online or by post to the appropriate Registrar. A £10 filing fee will be payable.
Within 7 days of submitting the application to dissolve the company, copies should be given to all notifiable parties, including:
- Pension managers or trustees.
- Other directors of the company.
- Any person who becomes a notifiable party within 7 days of the application being made.
If Companies House is satisfied with the application, it will display the information on the public register and publish notice of the proposed striking off in the Gazette in London, Edinburgh or Belfast. If no objections are raised, it will be struck off after 3 months of the date of the notice.
Your company will be required to submit a Company Tax Return and pay any outstanding corporation tax liabilities from the accounting period before the start-date of the winding-up process. Any capital gains made on the sale or disposal of business assets after the start of the winding-up process will fall into a new accounting period.
A final Company Tax Return and tax payment will be required when the winding up is complete. Directors may also have to account for personal gains or loses made on the disposal of assets and shares. This should be reported in their Self-Assessment tax returns.
You must ensure that the payroll is closed down. A final Full Payment Submission (FPS) should be submitted when running the final payroll, and you must pay any outstanding PAYE tax and National Insurance deductions by the given deadlines.
If your company is registered for VAT, it should be de-registered. A final VAT return should be filed and any outstanding VAT liabilities should be paid.
2. Do I need to tell HMRC my company has been dissolved if it never traded?
If your company has been dormant from the date of incorporation, it should have been registered with HMRC as ‘inactive’. In such cases, it will not be registered as ‘active’ for corporation tax purposes or any other tax liabilities like VAT or PAYE. As long as the company did not receive or spend any money during its lifetime, and no capital gains were made from selling or disposing of any business assets, it is highly unlikely that you will be required to pay any business taxes or file any tax returns.
We do, however, strongly recommend contacting HMRC to confirm that this is the case and to ensure no obligations have arisen as a result of closing your company, otherwise you may continue to receive statutory mail from HRMC at your registered office address. When contacting HMRC, you will be asked to provide your company’s unique taxpayer reference, so do make sure you have this to hand before calling.
Dissolving a dormant company
Closing a limited company is much easier when it has never traded. As long as the majority of a company’s directors agree to the closure, a ‘Striking Off’ application can be submitted. A director will be required to request and complete Form DS01, which should be filed with Companies House with a fee of £10.00. The following details should be provided on this form:
- Company name.
- Company Registration Number (CRN).
- Names and signatures of all or the majority of the directors.
Depending on the Companies House jurisdiction in which your company is registered, a ‘Notice’ will be published in the Gazette in London, Edinburgh, or Belfast to confirm your intention to close. The purpose of this is to provide official notice to third parties who may object to the closure. Provided no objections are raised within a 3-month period, Companies House will post a second notice in the Gazette confirming the closure. Dormant companies that have never traded are unlikely to receive any objections.
3. How do I close (dissolve) a limited company?
The closure of a limited company depends on whether it is solvent (able to pay its bills) or insolvent (unable to pay its bills). If it is solvent, the easiest way to close it is for the directors to apply to Companies House to have it struck off the register. Alternatively, you can start a members’ voluntary liquidation. If your company is insolvent, the directors can propose a creditors’ voluntary liquidation process.
This course of action will require at least 75% of the voting shareholders (by value of their shares) to agree to the closure by passing a winding-up resolution. In certain situations, a company can be forced to close by its creditors or HMRC.
Striking off a solvent company
To apply to have a solvent company struck off the Register of Companies, Form DS01 must be completed and signed by a majority of the directors. This type of closure will only be permitted if the company can satisfy the following conditions:
- It has paid all of its debts.
- It has not traded or sold stock within the past 3 months.
- The company name has not changed within the last three months.
- It is not threatened with liquidation.
- It does not have any existing agreements with creditors, such as Compulsory Voluntary Arrangements (CVAs).
Form DS01 can be downloaded from the Companies House website and delivered online or by post. A £10 fee will also be required. Companies House will send a letter to your registered office address to confirm acceptance of the application. The striking-off request will then be published in the Gazette in London, Edinburgh or Belfast.
If no objections are raised by any third parties, it will be stuck off the register within 3 months. A second notice will be published in the Gazette confirming the closure. After this time, your company will no longer exist.
Members’ voluntary liquidation of a solvent company
To close a solvent company by way of a members’ voluntary liquidation, the directors must declare that it can pay its debts in full within 12 months from the start of the winding-up process. The following six steps are required:
- Download Form 4.70 ’Declaration of solvency’ (companies in England and Wales) or request Form 4.25 from the Accountant in Bankruptcy (companies in Scotland).
- Complete the appropriate form, which should be signed by a majority of the directors.
- Within at least 5 weeks, you must hold a general meeting of the shareholders. A voluntary winding-up resolution must be passed. This usually requires a 75% majority vote.
- Advertise the resolution in the appropriate Gazette within 14 days of the general meeting
- Appoint a liquidator (authorised insolvency practitioner) to take control of the business and oversee the winding-up process.
- Companies in England and Wales should file Form 4.70 and the resolution with Companies House in Cardiff within 15 days of the general meeting; companies in Scotland should file Form 4.25 and the resolution with the Accountant in Bankruptcy within 15 days of the general meeting.
When the liquidation process has been completed, the insolvency practitioner will call a general meeting of the creditors and members. A full progress report of the liquidation will be presented at this final meeting. Notice of the meeting should be advertised in the Gazette at least one month beforehand.
The progress report should be sent to Companies House within one week of the meeting, along with a Return of Final Meeting (Form 4.71). The company will be dissolved within approximately 3 months of filing the report and return with Companies House, unless the court makes an order deferring the dissolution.
Creditors’ Voluntary Liquidation of an insolvent company
A creditors’ voluntary liquidation will be required if you wish to close a company that is unable to pay its bills. To start this process, a director should call a general meeting of shareholders. A 75% majority vote from the shareholders will be required to cease trading and to pass a winding-up resolution. If a resolution is passed, the company must:
- Appoint a liquidator to take charge of the company and oversee the liquidation.
- Send the resolution to Companies House within 15 days of the meeting.
- Advertise the resolution in the appropriate Gazette.
The company must also hold a creditors’ meeting within 14 days of passing the resolution. Creditors’ must be given at least 7 days’ notice of this meeting and it should be advertised in the Gazette. A Statement of Affairs (summary of the assets and liabilities) must be presented at the creditors’ meeting. A copy should be given to the liquidator after the meeting.
The liquidation process will be completed when all assets (if any) have been converted into cash and paid to creditors in order of priority. The company will be struck off the register within approximately 3 months of the liquidator holding a final meeting.
Compulsory Liquidation by creditors or HMRC
If your company cannot pay its bills and you are unable reach an agreement with your creditors, they can make an application to the court for a winding-up petition to have your company closed. It will be put into liquidation and its assets (if any) will be sold by the appointed liquidator. If you are dealing with insolvency issues, you should seek professional advice as soon as possible.
4. How long does it take to dissolve a company?
It takes at least 3 months for a company to be officially dissolved, but the length of time can vary considerably if the process is complex. Generally, however, a company will cease to exist no less than 3 months of the winding-up notice being advertised in the Gazette.
5. Can I re-open a previously dissolved company?
It is possible to restore (re-open) some dissolved limited companies by applying for a court order or by Administrative Restoration. If you wish to restore a company by a court order, we strongly advise seeking independent legal advice. You can find more information here.
To apply to Companies House for Administrative Restoration, you must have been a director and/or shareholder of the dissolved company at the time it was wound up, and it must have been trading at the time it was dissolved. Applications will not be accepted if they are made more than six years after the dissolution or if it was struck off under sections 1000 and 1001 of the Companies Act 2006 or section 652 of the Companies Act 1985.
An Application for Administrative Restoration (Form RT01) must be completed and filed at Companies House. A statement of compliance should be included to confirm that you’re entitled to make the application and that the company meets the conditions for restoration. You must also make a payment of £100 to Companies House.
6. How much does it cost to dissolve a limited company?
Aside from paying outstanding debts to creditors and wages to employees, there are various administrative costs associated with the closure of a company. The amount you will be required to pay will depend on how the company is wound up:
- Striking off a solvent company. This is normally the cheapest option. You will be required to pay a £10 fee to Companies House when the striking-off application is submitted.
- Members’ Voluntary Liquidation. You will be required to pay the liquidator’s fee, which can range from upwards of £1500 plus VAT. The total cost will depend on the complexity of the liquidation process. Many liquidator’s will quote a fixed price for their services. You will also have a pay a fee to the Gazette for advertising the liquidation of your company.
- Creditors’ Voluntary Liquidation. This is usually the most expensive way to close a company. The liquidator’s fee is based on the complexity of the process and the amount of work required. Typically, you should expect to pay around £3000 to £7000. If a company’s assets do not cover these fees, the directors may be personally liable for the costs
- Compulsory Liquidation. This is a type of closure that is forced by creditors’ or HMRC. The cost of issuing the winding-up petition is also paid for by the creditor, rather than the company, but any assets and finances belonging to the company will be seized by a liquidator and used to pay the creditors.
7. What permissions do I need to dissolve my company?
To close a solvent company, you must have the permission of a majority of the directors. They will indicate their consent by signing the striking-off application that is submitted to Companies House.
To close a company by way of a members’ voluntary liquidation or creditors’ voluntary liquidation, a 75% majority vote of the shareholders must agree to the winding-up of it.
If a third party wishes to force a closure, permission must be obtained from the court by applying for a winding-up petition.
8. Can anyone object to a company being wound up?
Objections can be made to Companies House by any interested party, including the shareholders, creditors, employees, directors and clients. Indeed, an objection can be made by the company itself if the striking-off application is bogus. All objections must be in writing and should be accompanied by supporting evidence.
By Chris Tapley, Content Writer for 1st Formations.