Is it easy to dissolve a company? It is usually easy if you satisfy the conditions to dissolve a company and are not trying to close a company with debts.
To easily dissolve a company you can do so using a DS01 form to strike off a company. It is also reasonably cheap as well. It costs £33 to apply and strike off and dissolve a company.
It could not actually be that hard because in the government’s financial year ended April 2023 there were 585,807 dissolutions. This easily dwarfs the number of formal liquidations each year which are in the region of 20,000. These will be included within those government statistics.
Easy To Dissolve A Company If You Strictly Follow The Rules?
When you dissolve a company the aim is to remove it from the register at Companies House so that it no longer exists as a live company. Once removed you no longer as a director would need to file accounts and confirmation statements as the company no longer exists. However, to ensure that the dissolution procedure is not used to avoid creditors’ and shareholders’ rights there are restrictions to ensure it is not abused.
It is quite easy to dissolve a company if you follow the procedures required which involve dealing with the restrictions and then ensuring you follow the rules when applying.
Restrictions On Dissolving A Company
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 as a business
- changed its name
- engaged in any other activity except one which is necessary for the striking off
- made a disposal of property before ceasing to trade 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
A company cannot apply to be struck off the register if it has bearer shares in issue. Bearer shares are where a warrant has been issued in respect of shares and there is no registered shareholder in the register of members. You can find further circumstances in which you cannot make an application in section 1004 and section 1005 of the Companies Act 2006.
A director will commit an offence if you breach these restrictions, and are liable for a fine on conviction.
Actions Before Applying To Dissolve A Company
To ensure the restrictions are complied with fully there are actions that a director needs to undertake before applying to dissolve a company.
If your company has creditors, members, employees etc, you should inform all the necessary people before applying, as any of them may object to the company being struck off. You should close the company’s bank account and transfer any domain names before you apply.
You may notify any other organisation or party who may have an interest in the company’s affairs, otherwise they might later object to the application. For example, HMRC, local authorities and government agencies.
If you are a director you should not resign before applying for strike off as you must be a director at the time Companies House receives the application.
The company’s bank account will be frozen from the date of dissolution, and any credit balance in the account will pass to the Crown. Any assets of a dissolved company will also belong to the Crown.
The company’s directors must also send a copy of the application to dissolve a company to any person who, at any time after the application has been made, becomes a:
- director
- member
- creditor
- employee
- manager or trustee of any employee pension fund
More information on the procedure to dissolve a company can be found in our guide How To Dissolve Or Strike Off A Company. However, If you do not qualify to easily dissolve a company then you may find our detailed guide How To Close A Limited Company of assistance to look at your alternative options.
Liquidation If An Easy Dissolution Process Is Not Available To Your Company
An alternative to the strike-off and dissolution process is that of liquidation. Although it is usually easy to dissolve a company the restrictions can sometimes be challenging, particularly when closing a company with debts and no assets.
If the company is insolvent then the directors can initiate a procedure known as Creditors Voluntary Liquidation. On the other hand, if the company is solvent then the directors can initiate a procedure known as Members Voluntary Liquidation.
Although liquidation can be more expensive than striking off a company, generally there are no restrictions to fetter a company going into liquidation except the directors will need to find a liquidator to liquidate the company. Indeed it is commonly the case for companies with assets of value of £25,000 or more that in a solvent Members Voluntary Liquidation the tax savings, including those additionally potentially available from Business Asset Disposal Relief can enable owner managed directors to save money overall by going into liquidation instead of going straight into dissolution. Always worthwhile taking professional advice before deciding such a course of action.
