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In most cases, you will need the agreement of the company’s directors and shareholders to
close a limited company, however the way you close the company depends on whether or not it can pay its remaining bills.
If the company can pay its bills (it is ‘
solvent’).
Options:
• apply to get the company struck off the Register of Companies
• start a members’ voluntary liquidation
For very small companies where the assets are less than £25,000, striking off the company is the most cost efficient way to close it, but there are circumstances where even for these companies, liquidation will be the best option.
For companies with assets of more than £25,000, liquidation will usually be better than striking off. Distributions made on the liquidation of a company will always be subject to
capital gains tax, unless tax anti-avoidance rules comes into play – typically when shareholders are involved in similar businesses in the two years following the liquidation.If striking off is used, distributions where assets are more then £25,000 will be subject to income tax and not capital gains tax.
The company can’t pay its bills (it is ‘insolvent’)
When the company is insolvent, the interests of the people the company owes money to (its creditors) legally come before those of the directors or shareholders.
The liquidation of the company will need to be arranged or your company might be forced into compulsory liquidation if creditors are not paid within agreed time frames.
Liquidation can be avoided by applying for a Company Voluntary Arrangement (CVA).
If the company doesn’t have a director
The company will need a director to close the company. If the company does not have a director, for example if there was a sole director who has passed, a new director will still need to be appointed. Eventually, Companies house will strike off a company that does not have a director, and if this happens the assets of the company will be auctioned or pass to the Crown under rules known and “
Bona Vacantia”. This is something to be avoided for any company with assets.
Shareholders must agree to appoint a new director and may need to vote on it. If a sole director has passed and there are not any shareholders, the executor of the estate can appoint a new director as long as the company’s articles allow it.
The company will still need to pay corporation tax and file a tax return even if there is not a director.
Making the company dormant
The company does not have to close if it is no longer trading. You can let it become ‘dormant’ for tax as long as it is not:
• carrying on business activity
• trading
• receiving income
The company will still be registered at Companies House. The company will still need to send the annual accounts and confirmation statement (previously annual return) to Companies House.
A limited company can be kept dormant for as long as needed.
If you would like assistance closing a limited company then please
contact your local Moore office.