Published: 31st July 2019
If you are looking to close your limited company you have various ways of doing this depending on the position your business is in. Your options are different if your company is solvent compared to those open to you if your business is struggling to pay its creditors.
The ideal way of closing down an insolvent company is through a formal liquidation process known as a Creditors’ Voluntary Liquidation (CVL). However, you may have heard that dissolving – or striking off – your company is a quicker and cheaper way to achieve the same end result. This is not strictly true. Although striking off your company at Companies House is appropriate for some, for others this is not the best way of achieving closure.
A DS01 is the form you will have to submit if you want to dissolve your limited company. The form can be obtained from Companies House, filled in by hand, and posted. There is not currently the facility to complete this process entirely online.
The completed DS01 form must be signed by a majority of directors and sent to Companies House accompanied with a cheque for the appropriate fee which is currently £10. If your company has two directors then both must sign the form in order for it to be accepted. Within seven days of sending the DS01 to Companies House you must also send a copy to any shareholders, creditors, and employees, as well as any directors who did not sign the form.
Once the DS01 has been processed, an official notice detailing your intention to strike off your company will be posted in the Gazette (either London, Edinburgh, or Belfast depending on where the company was originally incorporated) inviting any interested parties to make Companies House aware of any reason why your company should not be struck off the register. Should no objections be received in the two months following this notice, the company will be removed from the Companies House register, a second notice will be published in the Gazette, and the company will cease to exist as a legal entity.
When your strike off application is advertised, anyone can submit an objection. However, only those who can prove there is a valid reason for this will be upheld; should this happen your application will be suspended. By far and away the most common reason why a strike off application would be objected to is because the company has outstanding creditors who have lodged a complaint.
The reason for this is that once a company is dissolved, it no longer exists, meaning creditors would not be able to chase for any outstanding debts. Therefore it is in your creditors’ interests that your company remains active and on the register so that they can continue to pursue for repayment. If your strike off application is suspended then you will have to start the process again or consider entering into a formal liquidation process instead.
Quite simply, no. Dissolving a company is an informal way of closing down an unwanted business which is not currently trading. A CVL on the other hand, is a process which is used to bring a formal end to a company which is insolvent and unable to pay back the money it owes. A CVL is administered by a licensed insolvency practitioner who will take control of the company and its affairs, liaise with creditors on your behalf, and ensure the company is closed in the correct manner.
When a company is dissolved using the DS01 form, there is the possibility that the company could be restored to the register at any point should an outstanding creditor petition for this. If the company is restored in this way then it will return to the register along with any debts it had prior to being dissolve.
It is likely you are already aware that upon the closure of your company, any employees you have will be entitled to make a claim for redundancy, subject to them meeting the qualifying criteria. However, as directors are also often classed as employees of the business, should the company become insolvent and enter liquidation, directors are often entitled to claim redundancy pay just like any other member of staff.
If the company is unable to meet the redundancy payments owed to staff (including its directors), then an application can be made to the Redundancy Payments Service for government-funded redundancy pay. Money will be taken from the National Insurance Fund (NIF) and used to pay employees what they are owed.
It is important to note that directors will only be entitled to redundancy pay if their company is closed down through a formal liquidation procedure such as a CVL. If the company is dissolved using the DS01 form, directors forgo their right to claim redundancy and other statutory entitlements.
Furthermore, opting to dissolve a company rather than place it into liquidation means your employees will be forced to go through a tribunal in order to receive their statutory redundancy entitlements; this can be a lengthy and stressful process. Therefore, if either yourself, your co-directors, or your staff are likely to be eligible for redundancy, you should consider how the method you use to close down the company will affect their ability to claim redundancy pay.
There are various reasons why you may be looking to cancel your strike off application once you have submitted it. This could be by choice, but there are also a number of reasons why you may be required to withdraw your application too.
Your strike off application must be cancelled if your company resumes trading, changes its name, or partakes in any other activity unless necessary to complete the closure of the business. You will also need to halt the strike off if your company has formal insolvency proceedings started against it.
Alternatively, you may voluntarily decide to stop the strike off if you decide you would like to resume trading, or alternatively if you feel you would prefer to close your company by entering into a formal insolvency process.
Regardless of the reasons why you want to withdraw your strike off application, this is done by completing a DS02 form. This process can be completed online which is the quickest and easiest way to cancel the application. Please note you will need to lodge the DS02 form before your company is struck off; this method is not suitable for restoring your company to the register once it has already been dissolved, therefore you need to act fast if you are having second thoughts about dissolving your company.
Real Business Rescue’s team of licensed insolvency practitioners and turnaround professionals can provide invaluable help and guidance when it comes to closing down your limited company. We can talk you through the pros and cons of each option, and recommend the most appropriate course of action based on your individual situation. Call our team on 0800 644 6080 and arrange a free no-obligation consultation today. With 78 offices stretching from Inverness down to Exeter, Real Business Rescue can offer unparalleled director advice across the UK.