If you are looking to close your limited company and wind up its affairs, you may be wondering about the best way to bring your business to an end. There are various to close your ltd company, and much of this will depend on if the company is solvent or insolvent at the time of closure.
If your company is solvent – meaning it does not owe any company, individual, or HMRC any money – then you can close the business through a Members’ Voluntary Liquidation (MVL). All assets will be identified by the appointed insolvency practitioner, and these will then be distributed to shareholders as capital gains.
If your business has debts, however, the process is different. You can still close a company that owes money to HMRC or other creditors, however, this will need to be done through an alternative insolvency procedure.
Closing a company with debts is achieved through a process known as a Creditors’ Voluntary Liquidation – or CVL for short. This formal business closure process allows a limited company director to wind up their company voluntarily, while ensuring outstanding creditors are treated fairly and in accordance with the Insolvency Act 1986.
Closing a limited company through a CVL can only be done under the guidance of a licensed insolvency practitioner. Once appointed, you may need to cease trading immediately, and it will then become the responsibility of the insolvency practitioner to handle the company’s affairs from that point forward, including dealing with creditors on your behalf and ensuring the business is closed down in the correct way.
A company can also be closed by applying to have it dissolved and struck off the Companies House register. This is an informal business closure process and striking off is only recommended for those companies without debt. Dissolving a company in this way may be suitable for those ltd companies which have never traded or are otherwise dormant. If your company does not owe any money and you want to close it down, winding the business up and dissolving it at Companies House could be a way of achieving this. If your business has outstanding debts, however, company strike off will not be appropriate and you should take expert advice on how to close your company.
It must be remembered, that company closure is a complex area, particularly if your ltd company has debts it cannot repay, that is why seeking early advice from a licensed insolvency practitioner is vital. Continuing to trade while knowingly insolvent is a breach of your duties as a company director, and it could be that shutting the company is the best option for all concerned. An insolvency practitioner will be able to talk you through the options you have for winding up your business and bringing your company to a close in the best way possible.
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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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