I want to close my business and walk away

It’s possible to close your business and walk away, but the procedure you use depends on the financial position your company is in. If your business is solvent, voluntary strike‐off may be an option, but this isn’t a formal procedure and can lead to reinstatement if creditors aren’t informed.

A creditor who later becomes aware of the company’s closure can apply to have it reinstated to the Companies House register. This means it would be treated as if dissolution hadn’t taken place, and the creditor could make a claim for their debt.

Members’ Voluntary Liquidation (MVL), on the other hand, is an official process that must be administered by a licensed insolvency practitioner (IP). This allows the business to close down in an orderly manner, and ensures all due statutory process is followed.

Closing your solvent business tax‐efficiently

A further benefit of Members’ Voluntary Liquidation is its tax‐efficiency. Distributions are taxed as capital rather than income, and your tax liability can be further reduced by claiming Asset Disposal Relief (formerly known as Entrepreneurs’ Relief).

If you’re eligible for Asset Disposal Relief, your tax liability is lowered to an effective rate of 10%, allowing you to walk away from the business with a higher return from your investment.

UK Liquidators are MVL specialists and have extensive experience of helping directors close down their business in this tax‐efficient way.

How does Members’ Voluntary Liquidation work?

You and other directors must formally declare that the business is solvent. A meeting of shareholders is then arranged to pass a resolution that the company will enter Members’ Voluntary Liquidation.

Company assets are realised by the liquidator, all creditors are paid, and remaining sums distributed amongst members. The company name is then removed from the register at Companies House, and unlike voluntary strike‐off, it cannot be reinstated.

So what happens if your company is insolvent ‐ can you still walk away?

I want to close my insolvent business and walk away

Although your company has debts that it cannot afford to repay, you can still close it down and walk away as long as you’ve acted within the law and aren’t found to be responsible for its decline through misconduct or fraud.

In brief, when a company is insolvent it means:

• It cannot pay its bills as they fall due (cash flow insolvency) and/or
• Its liabilities exceed the value of its assets (balance sheet insolvency)

On entering insolvency, directors must cease trading and seek professional assistance. A process known as Creditors’ Voluntary Liquidation (CVL) is the best option as it enables directors to fulfil their legal duties and protects creditor interests.

How does CVL work?

Creditors are informed of the company’s position and invited to make their claims. In short, the company’s assets are sold to pay creditor claims as far as possible, with any remaining debts being written off. The company name is then removed from the Companies House register.

Although CVL incurs professional fees, it also allows eligible directors to claim redundancy pay, which could cover the cost of the procedure. In following this process you can reduce the chances of misconduct or wrongful trading allegations being made against you, and increase the likelihood of walking away with no repercussions.

For more information on how to close your business and walk away, and also on how to claim director redundancy, please get in touch with our expert team at UK Liquidators. We can arrange a same‐day consultation free‐of‐charge, and operate an extensive network of offices around the country.