If you’re thinking about closing down your limited company, whether that’s because it’s under financial pressure or that it simply serves no further purpose, it’s important to consider all your options.
Cost is clearly an important factor, and you may be wondering is there a cheap way to close a limited company? There are, but you need to factor in all the rules and regulations of eligibility when deciding how to close it down, and also your statutory obligations as a director.
Members’ Voluntary Liquidation (MVL)
If your company is solvent, a Members’ Voluntary Liquidation (MVL) may be a good solution. It’s a formal procedure that’s carried out by a licensed insolvency practitioner (IP), so it does attract professional fees. The company may own valuable assets that could be used to pay these fees, however, effectively making this a cheap way to close your limited company.
Another possible method of closure is company dissolution, which involves striking the company name from the Companies House register. There are potentially significant drawbacks, however. Your company could face reinstatement to the register if you fail to notify all creditors, for example, and you don’t have the reassurance that involvement from a licensed professional brings.
If your company is insolvent you may be tempted to close it down quickly, and as cheaply as possible, but it’s important to also consider your legal obligations as a director. If you don’t adhere to the strict insolvency laws in the UK, you could face personal liability for your company’s debts and potential disqualification as a director.
The company dissolution process we mentioned earlier isn’t suitable for insolvent companies, and you could face investigation as a director if you take this route when your company owes money.
Creditors can make a formal objection to dissolution – HMRC in particular, are known to do this quickly if they’re owed money – and you might be forced into compulsory liquidation as a result.
Compulsory liquidation also isn’t the best option. Waiting to be wound up can result in greater losses for your creditors, which in turn will trigger a stringent investigation into your conduct, potentially leaving you personally liable for the additional debts.
Creditors’ Voluntary Liquidation (CVL)
The best way to close down a company with debts is to enter Creditors’ Voluntary Liquidation. This places the interests of creditors first, and reduces your risk of being held personally liable for company debts.
If you’re an employee of your company, you may also be able to claim statutory redundancy if you enter a CVL and meet certain conditions. This money could then be used to fund the CVL. Alternatively, you may have personal funds available, or be able to use the proceeds of liquidating company assets to pay.
Closing down a limited company inexpensively is possible, even when it has debts. You just need to take care to follow insolvency regulations and act quickly with the best interests of creditors in mind.
The best way to do this is to seek professional insolvency help. Just make sure that you only deal with licensed firms, however, rather than unlicensed ‘insolvency experts’ - you might be charged a hefty fee by rogue companies for a simple referral to a firm of licensed IPs.
UK Liquidators is a partner-led company of licensed insolvency practitioners with more than 25 years’ experience. We’ll provide the reliable advice you need, and operate from a network of offices around the UK. Please contact one of the team to arrange a free same-day consultation.
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If you are considering liquidation for your company, taking expert advice at an early stage is crucial. At UK Liquidators, our team of licensed insolvency practitioners are committed to providing limited company directors with the help and advice they need to make an informed decision.
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