Voluntarily Closing a Limited Company

Closing down a Limited Company

There are times when the Directors voluntarily close down a Limited Company, for example, either the idea hasn’t worked out or the Directors are retiring and there is no-one to take over the business. This can be done fairly straightforwardly at Companies House depending on whether the Company meets the right conditions.

A Limited Company can be struck off only:

It hasn’t traded in the last 3 months;
Has not Changed names in the last months;
Isn’t being threatened with liquidation
There are no creditor’s agreements in place (a section 895 scheme).

If the company has done one of the above then it can be struck off via the voluntary liquidation route. Voluntarily closing a limited company is not an alternative to formal insolvency proceedings.

(A company may also be struck off by the Companies House Registrar itself if the limited company has failed to meet its obligations and they believe the company is not carrying on business or in operation.)

Tie up all Loose Ends First

So that the process is as smooth as possible, before there is an application to “strike off” a company, Directors have a number of responsibilities. If you fail to follow the rules, you may be liable for a fine or prosecution.

The limited company must be closed down legally, this means that they have to

Contact all interested parties and HMRC
- send a copy of the application to strike off within 7 days to anyone who will be affected (it is advisable to keep proof of posting), such as
  - shareholders,
  - creditors (banks, suppliers, landlords or tenants etc),
  - employees,
  - managers/trustees of any employee pension fund and
  - directors who did not sign the application
- HMRC needs to be told that the company has stopped trading and pay any final balances of PAYE or National Insurance. Also request that they close down the company’s payroll scheme.
Deal with employees, according to the rules of redundancy and pay all final wages or salaries.
Deal with business assets, which should be shared out amongst the shareholders, any remaining assets on the date of dissolution will be “bona vacantia” (vacant goods) and passed to the Crown because it does not have a legal owner. Also transfer any domain names and send final statutory accounts and a Company Tax Return to HMRC.

If Directors take any assets from the company they may be liable for Capital Gains Tax, but may be able to get tax relief on this, and submitted via their self-assessment tax return – but always get professional advice if unsure.

Record Keeping

Directors are required to keep financial records (bank statements, invoices, receipts) for 7 years after the company is struck off.

If employing staff they are required to keep insurance details for 40 years from the strike off date.

How to Apply to Strike off a Limited Company.

Directors must complete form DS01 and have it signed by the majority of shareholders. (make sure all the issues regarding assets, bank accounts, tax etc is completed before submitting this form.)

The form will asked to for the: Company Number, Company Name in full, the Name of the Directors, Signatures and Dates.

It provides clear instructions and checklists throughout. Any errors on the form will delay the striking off.

It costs £10 (either cheque or postal order), but obviously the fee can’t be paid from the companies bank account (as the accounts should be shut down!!)

Once the form has been received at companies House they will write to the Directors and Registered Office Address to inform them that they have received DS01 form and the request will be published as a notice in the appropriate local Gazette (this depends in which Country the company was initially registered). There are 3 local Gazettes covering England and Wales, Scotland and Northern Ireland. The Companies entry in the register will also be changed to “Proposal to Strike”.

After 2-3 months, if no-one has any objections, then a second notice is published in the Gazette and this means that the Company will no longer legally exist (dissolved).

The entry on the Companies House Register will be updated and shown as dissolved.

Objections to the striking off

Publicising the proposal to strike in the Gazette provides the opportunity for anyone to object to the striking off. They can write or email companies house - enquiries@companieshouse.gov.uk – they will be asked to provide evidence of their claims.

Anyone could object to the striking off, because of

The company has broken the conditions
The company owes money and action is being taken or pending
Not all parties were informed
The declarations on the DS01 form are false
The Directors have been trading or committed tax fraud or some other offence.

What if the Directors change their mind?

During the 3 months, the company may wish to start trading or it is no longer eligible, for example if it becomes insolvent, or the name has changed. If any of the conditions change it is the Directors responsibility to withdraw the application.

It only requires the signature of one Director to sign the withdrawal form DS02. It can also be withdrawn using the Companies House online service.

The Company can not apply to get your £10 refunded.

Once the company has been dissolved, it no longer exists so can be harder to undo and can only be restored by a court order