There may come a time when a business has come to the end of its life – whether this is because the directors and owners are approaching retirement, there is no longer a need for the business, or the company is part of a larger group which you wish to restructure.
In any circumstance, it’s important to seek professional advice to discuss the options available to you. Failure to do so can be costly.
Our experienced Insolvency and Recovery team can provide initial advice and support you through the process, ensuring a compliant conclusion to your business.
We understand that every business is unique, and we’ll adopt an individual focus that extends beyond advice; working together with you to help you reach the best possible outcome.
For solvent companies, there are two main options available when closing your company down – Members Voluntary Liquidation (MVL) or a strike-off. The right option is heavily dependent on the current trading circumstances and the goals of the owners. Failure to complete the right process can see you fall foul of Directors duties and responsibilities, leading to fines.
An MVL is a solvent liquidation process typically used as a tax-efficient way to distribute cash and/or other assets to the shareholders of a company and represents an orderly wind-down of a company.
Despite being a solvent liquidation, an MVL is governed by the Insolvency Act 1986 and it is necessary to appoint a licensed Insolvency Practitioner to act as liquidator of the company.
To enter into an MVL the shareholders must make a sworn Declaration of Solvency, which states that they have thoroughly reviewed the company’s balance sheet and finances and have concluded that it is solvent and able to reasonably repay all existing and prospective debts within a period of no more than 12 months.
The shareholders of a solvent company then pass a voluntary winding up resolution to realise the assets of the business in order to distribute the proceeds to company members.
The striking-off process of closing a company is far simpler than undergoing MVL. However, there are strict criteria that must be met to prevent rejection from HMRC and Companies House.
The business Directors will have to send form DS01 to Companies House. They must confirm that in the three months before the application, the company hasn’t traded, changed its name, or disposed of any assets.
Directors must pay any outstanding liabilities, dispose of assets, close the bank account and inform all relevant parties. If a copy of the DS01 application is not sent to the relevant parties within 7 days and notice is not provided within this time period, you could potentially be fined.
The business will be dissolved once 2 months’ notice has passed and nobody has objected.
Whilst a strike-off application is quick, cheap, and relatively simple, it’s important to bear in mind that there is no legal way of returning the remaining capital to shareholders, and that assets will be ‘lost’ and any distribution of such assets would be illegal.
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