If you’re wondering how to close a company and you’re not sure where to start, you’re not alone. Shutting up shop can be a complex process that confuses the most savvy of business owners. Whether you’re no longer able to run your company or have fallen on hard times since the pandemic, there are many reasons why you might want to start the company dissolution process. But before we get to the nitty gritty, let’s take a closer look at what company dissolution is.
What is company dissolution?
Company dissolution, also called ‘striking off’, is where your business is removed from the registrar of companies at Companies House, so annual returns and accounts no longer need to be filed. If your company does not owe anyone any money, there will be no liquidation costs and no-one will investigate your conduct as company director.
Does dissolving my company write off my debt?
No. If your company has debt, you will have to voluntarily liquidate your company instead. Liquidation refers to a formal insolvency procedure, whereby a company is closed by an appointed licensed insolvency practitioner. The liquidator then sells the company’s assets and revenue is distributed in order of priority among creditors and shareholders.
What criteria do I need to meet to dissolve my company?
According to Companies House, you can dissolve your company if:
– It hasn’t sold off any stock or traded in the last three months
-It hasn’t changed names in the last three months
-It isn’t threatened with liquidation
-It has no agreements with creditors, such as a Company Voluntary Arrangement (CVA).
So what’s the difference between liquidating a company and company dissolution?
To liquidate a company means a formal closing down by a liquidator where there are still assets and liabilities to deal with. Dissolving a company is where the business is struck off the register at Companies House because it is now inactive. These are very different processes. Liquidation means you need a licensed insolvency practitioner, whereas with dissolution, you do not.
Which is more complex, company dissolution or liquidation?
Liquidation is used when there are unpaid liabilities and creditors, which makes it a more complex process than company dissolution. While company dissolution can take around three months permitting no-one lodges an objection, liquidation can take in excess of a year.
Is it risk-free to dissolve a company?
The simple answer is no. A company can apply to the Registrar of Companies for dissolution, but this is not without risk. There are strict rules and procedures which must be complied with to ensure dissolution is done correctly and that you don’t inadvertently commit an offence.
If your business has fallen on hard times, knowing which direction to take is difficult. Whether you go down the company dissolution route or bring in a licensed insolvency practitioner, there are positives and negatives to each. At BEACON, we can help you avoid the risks of either option, and talk you through which route might be best for you.