How to close a company at Companies House

The most appropriate way to close a company at Companies House depends on whether the business is solvent or insolvent. If the company is solvent, it can close via two processes - voluntary dissolution or Members’ Voluntary Liquidation (MVL).

MVL may be recommended when a business owns significant assets. If a business is insolvent or could be approaching insolvency, however, a different type of liquidation procedure must be followed. This is called Creditors’ Voluntary Liquidation (CVL).

How to close a solvent company at Companies House

Voluntary dissolution

The business must not have traded, changed its name, or sold any property in the three months before applying for dissolution, nor must there be any ongoing legal action against the company.

Form DS01 is sent to Companies House along with the £10 fee, and the directors must:

• Close down the payroll
• Submit all outstanding statutory returns and accounts
• Pay outstanding tax liabilities
• Sell or transfer assets out of company ownership
• Inform creditors of the intended closure
• Close the company’s bank accounts

Once the application has been accepted by Companies House, a notice will be placed in the Gazette. If no creditors come forward to object, the company name will be removed from the register.

Members’ Voluntary Liquidation

MVL is a tax-efficient method of closing a company at Companies House when a significant distribution is to be made. A sale of business assets is arranged by the appointed insolvency practitioner who then distributes the proceeds among members.

There are significant tax advantages when using Members’ Voluntary Liquidation to close a solvent company, as the distribution is treated as capital rather than income. Additionally, any members who are eligible for Business Asset Disposal Relief (BADR) benefit from a tax rate of 10% on eligible gains, up to a lifetime limit.

The appointed insolvency practitioner oversees the asset sale and distribution, and again, the company name is removed from the register at Companies House.

Closing an insolvent company at Companies House

An insolvent company must follow an official procedure called Creditors’ Voluntary Liquidation, or CVL, whereby assets are liquidated to repay the business’ debts as far as proceeds allow.

Creditors’ Voluntary Liquidation is administered by a licensed insolvency practitioner, and is a process that results in the company being struck from the Companies House register. The voluntary nature of CVL reduces the likelihood of misconduct or negligence allegations being made against the directors, as they’ve taken the important step of protecting their creditors from further losses.

Directors may also be able to claim redundancy pay, which could help to cover the cost of the procedure.

Claiming director redundancy

Eligibility criteria for director redundancy include:

• Receiving a salary through PAYE rather than only dividends
• Working a minimum of 16 hours per week
• Working under a contract of employment for at least two years
• Being owed money by the company

Directors may also be entitled to receive other statutory payments, such as unpaid wages and arrears of holiday pay.

Professional advice on the best company closure method

Incorrectly closing down a company at Companies House can lead to disqualification and further sanctions against directors, so it’s important to seek professional guidance before going ahead.

Although the low cost of dissolution may make it an attractive option, an application to close down an insolvent company in this way is unlikely to succeed. Creditors informed of the intention would object, and make a claim against the company for the debt owed.

UK Liquidators can provide reliable independent advice on how to close a company at Companies House. We offer free, same-day consultations and work from offices around the UK. Please get in touch to ensure that you close your company using the correct process.