Issues such as IR35 and the impact of COVID-19 have naturally prompted many to consider closing their limited company. While this is not always a necessary step, (e.g. if someone is working on a job deemed inside IR35 but may return to outside IR35 work in future) if someone has firmly made the decision to move on then closing a limited company is understandable.
For solvent limited companies, there are two relatively straightforward options for closing down.
Voluntary dissolution
Voluntary dissolution is a simple process in which the owner of a limited company fills out a DS01 form to request that the company be struck off the Companies House register. Prior to completing this process, the owner must of course inform the company’s insurers and accountants (if any) of the decision, along with HMRC.
The company’s assets should be dispersed, or else they will be passed to the Crown upon the firm’s dissolution. Tax returns, VAT, accounts and payroll must all be closed and the owner should seek to ensure the company does not engage in any business not related to its dissolution for three months beforehand.
After this, the DS01 form is completed and sent off to Companies House and to any other affected parties (including members, creditors, employees, managers or directors who did not sign the form). If a company has more than one director, then at least half of them must sign the form. An official notice will then be published in the Gazette, after which, providing no objections are raised by third parties, the company’s closure can be confirmed three months later.
Members’ Voluntary Liquidation
Under a Members’ Voluntary Liquidation (MVL), the limited company’s director(s) must formally declare solvency and, within five weeks, hold a shareholder meeting at which liquidation is agreed.
Next, a licensed insolvency practitioner will be appointed to the firm and a notice posted in the Gazette. The insolvency practitioner will then take control of the company, realise its assets and ensure that any remaining claims with creditors are settled, before leftover assets and funds are distributed among shareholders and the business is dissolved.
Author: Steven English
10.09.2021
