How to close a limited company in the UK

When it comes to closing a limited company in the UK, there are a number of closure options available to company directors depending on the position of the company at the time of closure. It’s important to close a limited company using the correct procedure so that you don’t put yourself at risk of breaching your duties as a director, or risk unnecessary financial losses for your creditors.

Liquidation is commonly used to close a company, whether that company is solvent or insolvent, and involves a licensed insolvency practitioner (IP) winding down the business’s affairs. For solvent companies, it can be a highly tax-efficient procedure to follow.

Liquidation also benefits directors of insolvent companies, however, as they’re able to prioritise their creditors’ interests as is required by law. Company dissolution (or strike off) is another way to close a limited company in the UK, and this is an informal method that’s conducted by the company’s directors.

You can close your limited company via dissolution if the business is solvent and you haven’t traded or changed its name for three months. You must also not have entered into any agreements with your creditors.

In the case of voluntary dissolution, it’s the directors who wind down the business’s affairs. This includes closing down the payroll scheme, informing creditors of the plans to close, and paying any tax liabilities that remain due.

It’s highly advisable to obtain professional assistance when establishing the business’s financial position before entering this process, however, as company dissolution isn’t appropriate for insolvent companies.

If your business is carrying unmanageable debt and cannot be rescued, Creditors’ Voluntary Liquidation offers you the best way out of the situation. It allows you to execute your legal duties as a director of an insolvent company, which is an important consideration in these circumstances.

As with solvent liquidation, CVL also requires a licensed insolvency practitioner to be appointed to carry out the process. This involves selling business assets at a liquidation auction and distributing the proceeds amongst creditors according to the statutory ranking.

Although your actions as a director will be investigated during a CVL, by voluntarily closing your company in this way you reduce the chances of wrongdoing or misconduct accusations being made against you.

Company Closure can provide further advice on closing a limited company in the UK, tailored to your circumstances. We offer free, same-day consultations and operate a broad network of offices nationwide. Please get in touch to find out more.