Closing down a company without any debt leaves a director with two main options. One option is to put the company into Members Voluntary Liquidation and the other option is to dissolve the company by striking it off from Companies House.
This article will explore the differences between these two key approaches if you want to close a company down that is solvent.
You may wish to stop trading generally, do other things or trade through another legal structure such as a sole trader rather than dealing with the option of a limited company. Either way, if you wish to be free from the burden of the company, corporation tax and filing accounts at Companies House you will need to close it down.
The process is far simpler, generally quicker and cheaper than closing a company with debts.
Members Voluntary Liquidation
Members Voluntary Liquidation is a way to close a company that is solvent. A company without any debt will be solvent so it is a effective way to close such a company.
The process involves passing a resolution for winding up by the shareholders. It requires 75% or more of the shareholders to pass what is known as a special resolution.
As a result of the company going into liquidation, a liquidator is appointed to winding up the affairs of the company. The liquidator’s duties involve realising the assets and then distributing them to the company’s shareholders after paying the costs of liquidation.
Strike Off A Company
Striking off a company that results in dissolution is by far the most common way to close a company. There were 585,807 dissolutions in 2023 in the UK.
There are usually less than 25,000 liquidations of UK companies a year so it is safe to say that the vast majority of company closures result from the strike off procedure.
In order to close a company that has no debts you can subject to strict compliance with the conditions use a DS01 form to strike off a company. It is a relatively inexpensive procedure costing £44 to apply to strike off a company.
Conditions Before Striking Off A Company
Section 1004 and section 1005 of the Companies Act 2006 set out the circumstances in which the company may not apply to be struck off.
For example, the company may not make an application for voluntary strike off if, at any time in the last 3 months, it has:
- traded or otherwise carried on business
- changed its name
- engaged in any other activity except one which is necessary for the purpose of making an application for strike off and concluding the affairs of the company, including complying with any statutory requirement
- made a disposal for value of property for the purpose of disposal for gain in the normal course of trading
A company cannot apply to be struck off if it is the subject, or proposed subject, of:
- any insolvency proceedings such as liquidation
- a section 895 scheme compromise or arrangement between a company and its creditors or members
For more detailed information on how to close a business please visit our main How To Close A Limited Company page.
