Can I dissolve my limited company?

If the time has come to close your limited company and bring trading to an end, you’ll usually need to dissolve the company through Companies House.

This puts an end to the legal entity of your business, meaning you may have obligations to meet before you can dissolve your business.

How you do this will depend on whether your company can pay itself debts or not.

Dissolving a solvent company

A solvent company is one that is able to pay any outstanding debts or bills with cash reserves or liquid assets belonging to the business.

It is simpler to dissolve a solvent company than an insolvent one, and can be done by either:

• Applying to strike the company off the Companies Register
• Starting a members’ voluntary liquidation

Striking off is usually the easier and less expensive of the two options, but there are some circumstances in which you might not be able to do it, such as if you have sold stocks within the last three months.

You’ll usually need the agreement of all significant shareholders and directors to dissolve a limited company.

Dissolving an insolvent company

An insolvent company is one that cannot pay its debts and bills using its cash reserves or liquid assets.

In this case, repaying your creditors is legally more important than your own needs, meaning you will be expected to either:

• Enter administration – A period which protects your business from legal action by creditors while an insolvency practitioner makes a plan to try and avoid liquidation
• Enter a creditors’ voluntary liquidation (CVL) – You and other shareholders agree with your creditors to cease trading and pay debts by selling assets
• Submit to compulsory liquidation – An arrangement under which your creditors apply to the Court to get their debts paid by closing your business.

To achieve the best outcome, it is best to take a proactive role in the situation. As soon as it is obvious that your company can’t pay its debts, discuss with your financial and legal teams to find out how you can address creditors before you are forced to liquidate your company.

Help with dissolution

Dissolving your limited company can be a straightforward process, or it can be complex and fraught with legal obligations towards creditors.

Whatever the situation you’re in, we always recommend consulting with a legal specialist to discuss which type of dissolution or liquidation is right for you and your business.

We can advise you on following the correct procedure and addressing any credit obligations prior to closing down your business and dissolving it through Companies House.

Contact a member of our business advisory team today to discuss.

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