A Concise Guide To Closing A Limited Company Without Debts
There are many reasons why you may be considering closing a limited company without debts. Perhaps you don’t have a succession plan in place, or maybe the business has simply run its course. Whatever the reason, if you’re reading this article then you’re likely to be seeking more information about how to begin the process of closing your limited company. So, without further ado, let’s begin our short and simple guide to closing a limited company without debts.
The options
So long as your company is ‘solvent’ i.e its assets are greater than its liabilities, there are two methods you can use to close the company. These are:
- Voluntary Strike Off
- Members’ Voluntary Liquidation (MVL)
In order to help you weigh up which option is best for your business, let’s take a look at what each of these processes involves.
Voluntary strike-off
One option for closing a limited company without debts is to get it ‘struck off’ the Companies Register. This is done by making an application to the Registrar of Companies who will advertise for the company to be struck off. If no objections are made within a 3 month period then the company is dissolved. However, it’s important to note that you can only apply for your company to be struck off if it:
- hasn’t traded or sold off any stock in the last 3 months
- hasn’t changed names in the last 3 months
- isn’t threatened with liquidation
- has no agreements with creditors, e.g a Company Voluntary Arrangement (CVA)
If your business doesn’t meet these requirements then you’ll need to enter voluntary liquidation, which brings us on to our next point.
Members’ Voluntary Liquidation (MVL)
The second option for closing a limited company without debts is a Members’ Voluntary Liquidation (MVL). This process involves liquidating the company’s assets in the most tax-efficient way and distributing the funds to shareholders. You can read more about the process of an MVL in our previous article, however for now, here is a short summary of how it works:
- Instruction to liquidate (A licensed insolvency practitioner is instructed to lead the process)
- Declaration of solvency (Setting out the company’s remaining assets and confirming that all debts can be paid within 12 months of the liquidation)
- Shareholders and directors meeting (Where it is agreed to place the company into voluntary liquidation)
- Assets realised and distributed
- Finalisaton (Once clearance is obtained from HMRC, the company can be officially dissolved)
What’s the best option?
Now we’ve established that the two options for closing a limited company without debts are Voluntary Strike Off or Members Voluntary Liquidation, you’re likely to be wondering which is the better option and why.
Whilst it costs less to strike off a company rather than put it into voluntary liquidation, many business owners choose to close their company via an MVL. This is to extract company funds in the most tax-efficient manner and/ or to provide peace of mind that the affairs of the company have been wound up properly by a licensed insolvency practitioner. Take a look at our article ‘MVL vs Strike Off – Which Is Better?’ to find out why most solvent businesses choose to close their company via voluntary liquidation.
Hopefully, this short guide has given you more clarity on how to go about closing a limited company without debts. For more information on any of the points we’ve discussed, or, to learn more about the process of closing your limited company via an MVL, please don’t hesitate to get in touch with us today.
