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Solvent Liquidation: Advice for Shareholders
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What you need to know about liquidating a solvent limited company
If you want to bring about an end to a solvent limited company, you have two main options – striking off or liquidation. The best option for you will usually come down to how much money there is in the company, in both cash and assets.
For information on closing an insolvent company, please visit our dedicated Closing a Limited Company page. To learn more about the liquidation process, you can read more on our How much does it cost to Liquidate a Limited Company page.
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By its nature, a solvent company will have no outstanding debts of any kind, whether this is to staff, suppliers, or HMRC.
However, being solvent does not necessarily mean that there is much, if any, money in the bank. Perhaps it never generated much revenue, has been dormant for a number of years, or you never traded with it in the first place. If this is the case, the a straight forward striking off will usually be the quickest and cheapest way of closing a company of this type.
Alternatively, if your company has a significant amount of money to distribute to shareholders, you can enlist the services of an insolvency practitioner and go through a formal closure by way of a Members’ Voluntary Liquidation (MVL). This process will give you greater control when it comes to distributing the company’s assets and will allow you to take advantage of entrepreneurs’ relief which, depending on your circumstances, could result in a huge tax saving on the money extracted from the company compared to taking this out as a dividend.
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If your company is solvent, you can request that your company be struck off the register held at Companies House by completing a DS01 form. This will bring about an end to the business in a relatively quick and inexpensive manner. The fee for striking off currently stands at £10, and so long as no one objects to your application, your company will be dissolved two months after submitting your request. Before applying for strike off you should ensure your company has not traded, sold off any stock, or changed names in the previous three months. This practice is sometimes known as dissolution, or dissolving a company.
Before you go down this route, you should be aware of the rules surrounding ‘bono vacantia’. Literally translated as ‘vacant goods’, this practise means that all assets of the company will be transferred to the crown once it has been dissolved. Assets include cash, land, and property, as well as copyrights, trademarks, and other intellectual property. Therefore it is vitally important that you ensure all assets are extracted prior to asking for the company to be struck off.
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There is no getting away from the fact that an MVL comes with a larger price tag than a striking off application, however, by going down this route you can ensure you are extracting the company’s assets in the most cost-effective manner and you will also be able to take advantage of Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief).
Business Asset Disposal Relief allows you to pay a reduced 10% rate of Capital Gains Tax (CGT) when you sell, dispose of, or otherwise close your company. In order to qualify you must own at least 5% of the company and have done so for at least a year. This scheme is subject to a lifetime limit of £10 million.
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Not only will an MVL bring about an end to your company in the most tax efficient way possible and thereby maximising returns for shareholders, you can also rest assured that the company has been closed down in a fully compliant manner and all your obligations as director are over.
If you would like to learn more about MVLs, Business Asset Disposal Relief, or anything else related to company liquidation, call Real Business Rescue today. You can arrange a same-day appointment with a licensed insolvency practitioner who will be happy to discuss all the options available to you and your company, and suggest the best way forward. With 100 offices across the UK, you’re never far away from expert and confidential advice.
Further Reading on Solvent Liquidation: Advice for Shareholders
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