Closing Company On Companies House – How To Do it?

Closing a company on Companies House can be a significant decision, often marking the end of a business venture. Whether you’re retiring, your company is no longer trading, or it’s simply time to move on, understanding the process of closing your company in the UK is crucial. This guide will walk you through the steps required to close a company registered with Companies House.

Process of Closing Company On Companies House

Closing a Solvent Company

Closing a solvent company, also known as dissolving or striking off a company, is a relatively straightforward process when the company has no debts and can meet all its financial obligations. This process is typically chosen when the company is no longer trading, and the directors wish to formally close the business. Here’s how to proceed with closing a solvent company in the UK.

1. Ensure Solvency

Before you can close your company, it is essential to ensure that the company is indeed solvent. This means:

• All Debts Are Paid: The company should have no outstanding debts to creditors, including HMRC, suppliers, employees, and any other parties.
• No Pending Liabilities: There should be no ongoing legal proceedings or potential liabilities that could arise in the future.
• Final Accounts and Tax Returns: Submit your final accounts to HMRC and ensure all tax obligations, including Corporation Tax, VAT, and PAYE, are fully settled.

2. Distribute Remaining Assets

Once all debts are paid, any remaining assets of the company must be distributed among the shareholders. This distribution should be handled in accordance with the company’s articles of association and any relevant legal requirements.

3. Apply for Voluntary Strike-Off

If the company has not traded or conducted any business activities for at least three months, you can apply for a voluntary strike-off from the Companies House register. The steps include:

• Complete Form DS01: This is the application form for striking off a company. It must be signed by a majority of the directors.
• Notify Interested Parties: Inform all relevant parties, including shareholders, creditors, employees, and other stakeholders, about your intention to close the company.
• Submit the Application: Send the completed DS01 form to Companies House along with the required fee. Companies House will then publish a notice in the Gazette.

4. Company Dissolution

If no objections are raised within two months of the notice being published, Companies House will dissolve the company, and it will cease to exist. The company’s name will be removed from the register, and it cannot be restored unless by court order.

5. Post-Closure Responsibilities

Even after dissolution, you must retain the company’s financial and legal records for at least six years. This is crucial in case any issues arise in the future.

Closing an Insolvent Company

When a company is insolvent, meaning it cannot pay its debts as they fall due, the process of closing the company is more complex and involves formal insolvency procedures. Here’s how to proceed with closing an insolvent company in the UK.

1. Recognizing Insolvency

A company is considered insolvent if:

• It Cannot Pay Debts: The company is unable to meet its debt obligations as they become due.
• Liabilities Exceed Assets: The company’s liabilities exceed its assets on the balance sheet.

Recognizing insolvency early is crucial, as continuing to trade while insolvent can lead to serious legal consequences for directors, including personal liability.

2. Seek Professional Advice

If you believe your company is insolvent, it’s essential to seek advice from an insolvency practitioner (IP). An IP will assess the company’s financial situation and advise on the best course of action, which could include liquidation, administration, or a company voluntary arrangement (CVA).

3. Creditors’ Voluntary Liquidation (CVL)

The most common process for closing an insolvent company is Creditors’ Voluntary Liquidation (CVL). The steps include:

• Directors’ Meeting: The directors must hold a meeting to agree that the company should enter into CVL.
• Appoint an Insolvency Practitioner: An IP is appointed to oversee the liquidation process.
• Creditors’ Meeting: A meeting with creditors is held where the IP outlines the company’s financial situation. Creditors can ask questions and vote on the appointment of the liquidator.
• Liquidation Process: The IP takes control of the company, sells its assets, and distributes the proceeds to creditors. The company is then struck off the register at Companies House.

4. Compulsory Liquidation

If creditors believe the company is insolvent and want to force its closure, they can petition the court for a Compulsory Liquidation. This involves:

• Winding-Up Petition: A creditor files a petition with the court to wind up the company.
• Court Hearing: A hearing is held where the court decides whether to grant the winding-up order. If granted, the company is placed into compulsory liquidation.
• Official Receiver: The court appoints an Official Receiver (or another IP) to liquidate the company’s assets and distribute the proceeds to creditors.

5. Directors’ Duties and Consequences

During insolvency, directors have a legal duty to act in the best interests of creditors. Failure to do so can lead to personal liability for company debts, disqualification from acting as a director, or other legal actions.

6. Post-Liquidation Considerations

After liquidation, the company will be dissolved, and its name removed from the Companies House register. Directors must cooperate fully with the liquidator and ensure that all company records are maintained as required by law.

Notifying HMRC of Company Closure

When you decide to close a company in the UK, notifying HMRC (Her Majesty’s Revenue and Customs) is a crucial step in the process. This ensures that all tax obligations are settled and that the company is officially deregistered from various tax schemes. Here’s what you need to know about notifying HMRC of your company’s closure.

1. Informing HMRC of the Decision to Close

As soon as the decision to close the company has been made, you should inform HMRC. This can be done by writing to your local Corporation Tax office. Your notification should include:

• The Company’s Name and Registration Number
• The Date the Company Ceased Trading
• Details of Any Final Accounts Submitted

It’s important to communicate clearly that the company will be closed and will no longer be trading, so HMRC can update their records accordingly.

2. Filing Final Accounts and Corporation Tax Returns

Even after ceasing trading, your company is still required to file final accounts and a final Corporation Tax return. This process includes:

• Submitting Final Accounts: These should cover the period up to the date the company ceased trading. You must include any income earned, expenses, and any final transactions.
• Filing the Final Corporation Tax Return: This return should cover the same period as the final accounts and must be submitted to HMRC. If any Corporation Tax is due, it should be paid within nine months and one day after the end of the accounting period.
• Paying Any Outstanding Corporation Tax: Ensure that all Corporation Tax liabilities are settled. HMRC will calculate any tax owed based on the final return and accounts submitted.

3. Cancelling VAT Registration

If your company is VAT-registered, you’ll need to cancel your VAT registration when closing the company. To do this:

• Complete a VAT 7 Form: This is the form used to deregister from VAT. You can complete this online or by post.
• Submit the Final VAT Return: This return should cover the period up to the date of cessation. Make sure to account for any stock, assets, or services that were still held at the time of closure.
• Pay Any Outstanding VAT: Settle any VAT owed to HMRC as indicated on the final VAT return.

4. Closing PAYE Schemes

If your company has employees, including directors on the payroll, you must close the PAYE scheme. The steps include:

• Sending Final Payroll Reports: Submit your final Full Payment Submission (FPS) to HMRC, marking it as the last submission.
• Closing the Payroll Scheme: Inform HMRC that this is the final payroll report for the company, and the scheme should be closed.
• Providing P45s to Employees: Issue P45 forms to all employees, including directors, to confirm their employment has ended.

5. Settling Any Outstanding Taxes

Ensure that all other taxes, such as National Insurance contributions, are fully settled. HMRC will not allow the company to close if there are outstanding tax liabilities, so it’s crucial to clear these before applying to strike off the company.

6. Applying for Corporation Tax Clearance

Once all tax obligations have been fulfilled, you can request a Corporation Tax clearance from HMRC. This clearance confirms that no further Corporation Tax is due, allowing you to proceed with the closure process.

7. Keeping Records

Even after the company has been closed, it is a legal requirement to keep all business records, including accounts and tax records, for at least six years. This is important in case of any future queries or audits by HMRC.

By following the appropriate procedures and consulting with experts, you can navigate the company dissolution process smoothly and pave the way for a fresh start.

Company Closure Requirements and Costs

Closing a company involves several legal and administrative steps, and understanding the requirements and potential costs is crucial for a smooth and compliant closure. This guide will cover the key requirements and costs associated with closing both solvent and insolvent companies in the UK.

1. Requirements for Closing a Solvent Company

When closing a solvent company, the process typically involves voluntary strike-off or members’ voluntary liquidation (MVL). The key requirements include:

• Settling Debts: Ensure all outstanding debts are paid off, including taxes, loans, and any other obligations.
• Filing Final Accounts and Tax Returns: Submit final accounts and tax returns to HMRC. All Corporation Tax, VAT, and PAYE obligations must be fulfilled.
• Distributing Remaining Assets: After debts are settled, distribute any remaining assets to shareholders according to the company’s articles of association.
• Ceasing Trading: The company must cease trading and conducting business activities for at least three months before applying for strike-off.
• Notifying Interested Parties: Inform all shareholders, creditors, employees, and other relevant parties about the intention to close the company.
• Filing Form DS01: Complete and submit Form DS01 to Companies House for voluntary strike-off. This form must be signed by the majority of the directors.
• Publication in the Gazette: Companies House will publish a notice in the Gazette, giving interested parties an opportunity to object to the strike-off.

2. Requirements for Closing an Insolvent Company

For insolvent companies, the process involves a more complex liquidation procedure, typically through Creditors’ Voluntary Liquidation (CVL) or Compulsory Liquidation. The requirements include:

• Engaging an Insolvency Practitioner (IP): Appoint an IP to oversee the liquidation process. The IP will assess the company’s financial situation and guide the liquidation.
• Creditors’ Meeting: Hold a meeting with creditors to present the company’s financial position and agree on the liquidation process.
• Asset Liquidation: The IP will take control of the company’s assets, sell them, and distribute the proceeds to creditors.
• Filing with Companies House: The IP handles the administrative tasks, including notifying Companies House of the company’s liquidation and eventual dissolution.
• Directors’ Duties: Directors must comply with their legal duties during insolvency, including cooperating with the liquidator and acting in the best interests of creditors.

3. Costs Associated with Closing a Solvent Company

Closing a solvent company can involve several costs, including:

• Strike-Off Fee: The fee for submitting Form DS01 to Companies House is £10.
• Final Account Preparation: The cost of preparing final accounts and tax returns varies depending on the complexity and whether you use an accountant, typically ranging from £500 to £1,000.
• Distribution of Assets: If you opt for a Members’ Voluntary Liquidation (MVL) to distribute significant assets, the cost of engaging an insolvency practitioner can range from £1,500 to £4,000 or more.

4. Costs Associated with Closing an Insolvent Company

The costs of closing an insolvent company are generally higher due to the involvement of insolvency professionals:

• Insolvency Practitioner Fees: The IP’s fees for managing a Creditors’ Voluntary Liquidation (CVL) can range from £4,000 to £10,000 or more, depending on the complexity of the case.
• Compulsory Liquidation Costs: If a creditor petitions the court for compulsory liquidation, there will be court fees (approximately £1,600) and a deposit to the Official Receiver (around £2,600).
• Legal Fees: Additional legal fees may be incurred if there are disputes, claims, or legal proceedings related to the company’s closure.
• Asset Realization: The costs associated with selling company assets, such as valuation and auction fees, are also part of the liquidation expenses.

5. Potential Additional Costs

• Outstanding Debts: Any unpaid debts that need to be settled before closure.
• Employee Redundancy Payments: If you have employees, redundancy payments and any other due salaries or benefits must be accounted for.
• Tax Liabilities: Any outstanding tax obligations must be cleared before the company can be closed.

Requirement/Service	Solvent Company	Insolvent Company
Strike-Off Fee	£10 (Form DS01 submission)	N/A
Final Account Preparation	£500 – £1,000 (Accountant fees)	N/A
Members’ Voluntary Liquidation (MVL)	£1,500 – £4,000 (Insolvency Practitioner fees)	N/A
Insolvency Practitioner (IP) Fees	N/A	£4,000 – £10,000+ (Creditors’ Voluntary Liquidation – CVL)
Compulsory Liquidation Costs	N/A	£1,600 (Court fees) + £2,600 (Official Receiver deposit)
Legal Fees	Varies (If required for disputes or claims)	Varies (For disputes, claims, or legal proceedings)
Asset Realization Costs	N/A	Varies (Valuation and auction fees)
Outstanding Debts	Must be settled before closure	Must be settled or addressed during liquidation
Employee Redundancy Payments	Varies (Redundancy payments, salaries, benefits)	Varies (Handled by IP, typically required)
Tax Liabilities	All tax obligations must be cleared	Handled by IP, any outstanding tax must be settled

Consequences of Company Closure and Striking Off

Closing a company and striking it off the Companies House register brings several important consequences. Understanding these impacts can help ensure that the process is managed smoothly and that any potential issues are addressed properly.

1. Loss of Legal Status

Once a company is struck off, it ceases to exist as a legal entity. This means:

• End of Business Operations: The company can no longer trade, enter into contracts, or carry out any business activities.
• Cancellation of Liabilities: The company is no longer liable for debts or obligations; however, directors may still be held personally liable if they acted improperly.

2. Assets and Liabilities

• Assets Become Bona Vacantia: Any assets left in the company at the time of striking off, such as property or bank balances, become the property of the Crown (bona vacantia). Recovering these assets requires restoring the company to the register.
• Outstanding Liabilities: While the company’s obligations are generally canceled, creditors can still seek recovery if the company was struck off while insolvent. In such cases, the company might be restored to the register to settle debts.

3. Director Responsibilities

• Directors’ Duties End: Directors are released from their duties once the company is struck off, but they must have acted in good faith during the closure process.
• Potential Personal Liability: If directors are found to have acted negligently or fraudulently, they may face personal liability for any outstanding debts.

4. Impact on Credit Rating

• Negative Credit Implications: Striking off a company, especially if it was insolvent, can negatively affect the directors’ and shareholders’ credit ratings, potentially making it more difficult to obtain financing in the future.

5. Legal Proceedings

• Suspension of Legal Actions: Any ongoing legal proceedings against the company are discontinued once it is struck off. However, if a creditor or interested party successfully restores the company, legal actions can resume.

6. Restoring a Struck Off Company

• Restoration by Application: If there’s a need to restore the company (e.g., to recover assets or resolve legal disputes), an application can be made to the court or Companies House. This can be initiated by directors, shareholders, or creditors.
• Time Limits: There are strict time limits for restoring a company, typically six years from the date of dissolution.

To ensure a smooth and compliant closure, it is advisable to seek professional advice from a solicitor or insolvency practitioner who specializes in company closure. They can guide you through the necessary steps and provide valuable insights into any legal or tax implications that may arise.

Conclusion

Closing a company, whether through voluntary strike-off or liquidation, is a significant decision with lasting legal and financial implications. Properly notifying HMRC, settling all debts, and ensuring compliance with legal obligations are critical steps in this process. Striking off a company results in the loss of its legal status, the forfeiture of any remaining assets to the Crown, and the cancellation of liabilities, although directors may still face personal liability for any misconduct.

Understanding the requirements, costs, and consequences of closing a company ensures a smooth and compliant process, protecting directors from potential legal issues and safeguarding personal and business interests. Seeking professional advice at each stage can help navigate the complexities and ensure that all aspects are handled effectively.

FAQ

How long does it take to close a company on Companies House?

It typically takes about three months to close a company after submitting the strike-off application, assuming no objections are raised.

Can I close a company that has never traded?

Yes, you can close a non-trading company by applying for a voluntary strike-off through Companies House using Form DS01.

Do I need to notify HMRC when closing my company?

Yes, you must inform HMRC, submit final accounts, and settle all outstanding taxes before closing your company.

What happens to the company’s assets after it is struck off?

Any remaining assets become the property of the Crown (bona vacantia) and can only be recovered if the company is restored to the register.

Can a company be restored after being struck off?

Yes, a company can be restored within six years of dissolution, usually by court application or through Companies House.

What are the costs associated with closing a company?

Costs vary but generally include the £10 fee for the strike-off application, final accounting fees, and potential insolvency practitioner fees for insolvent companies.

Are directors personally liable after the company is closed?

Directors are generally not liable after closure unless they acted improperly during the winding-up process, in which case they may face personal liability.

Why would a company voluntarily strike off?

A company may choose to voluntarily strike off if it is no longer trading, has no debts, and the directors wish to close it down without the need for a formal liquidation process. This can be due to retirement, the company’s purpose being fulfilled, or simply because the business is no longer viable or needed. Voluntary strike-off is a straightforward and cost-effective way to officially dissolve the company when there are no outstanding liabilities.