Dissolving a Company

What does it mean to Dissolve a Company?

Dissolving or ‘striking off’ a company simple means that you wish to close it down by removing its name from the Companies House register. Once a company is removed from the register, legally it no longer exists.

Is Dissolving a company a form of Liquidation?

Dissolution and Liquidation are two separate processes. Dissolving a company is a way to close a company while it is still solvent and has the ability to settle its debts within a 12 month period. Liquidation is a process to close a company that is insolvent, meaning that your liabilities(debts) are in excess of your assets.

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What are my alternatives?

Dissolving a company can often be the right decision for more straightforward situations, though there are many alternatives if your situation is more complicated.

If your company is solvent and has a large amount of assets and creditors that need to be dealt with by a professional insolvency practitioner to avoid further complications a Members’ voluntary Liquidation (MVL) might be your best option for closure of your company. This option is only viable for companies that can settle their debts within a 12 month time period however.

Should your company be insolvent it would be best to consider a CVL or Administration depending on your circumstances.

How can I dissolve my company?

To be able to dissolve your company you must fulfil certain criteria, these are:
Being solvent (assests are in excess of Liabilities)
Have stopped trading or selling stock for at least 3 months
You have not changed names within at least 3 months
You are not being threatened with any other form of insolvency and do not have any agreements with creditors such as a Company Voluntary arrangement (CVA).

Assuming the above criteria are fulfilled the process of dissolving a company is relatively straightforward, a DS01 form signed by a majority of the directors (if there are only two directors both signatures are required) must be submitted to Companies House along with a small fee of (at present) £10.

What should I do before dissolving my company?

If you are certain you wish to dissolve your company, there are a few concerns you should take care of beforehand, these are:
Once a company is dissolved any assets remaining are transferred to the Crown and become Bona Vacantia, so you should ensure any assets are taken out and distributed to any creditors prior to the dissolution.
You need to pay employees their final wages and if making staff redundant certain rules must be followed.
Filing accounts and a company tax return with HMRC stating that they are final accounts as the company is being dissolved.
You must pay any outstanding corporation tax, PAYE, NI or other tax liabilities
Deregister for VAT and close down payroll schemes vis HMRC.
Close company bank accounts after paying any outstanding company debts.
Informing all relevant parties including HMRC of the decision to dissolve the company within 7 days of sending the application to Companies House.

If your company owes money to creditors or HMRC it is highly likely that they will object to the dissolution of the company, it is crucial any outstanding liabilities are paid prior to the your application to prevent this action being taken. If the objection is supported by the registrar the dissolution will be stopped. Creditors can apply for a court order to restore the company to the register after it is dissolved if the company has evaded payment to them, this is why it is so important all relevant parties are informed of the decision and debts are fully settled before the dissolution.