Can I wind up my own company?

What’s the most appropriate closure method for my business?

In some circumstances, winding up your own company is the most cost-effective way to close it down. The process is called Voluntary Dissolution. Once you have prepared your company by ceasing trading and repaying your creditors, you can apply to strike your company off the official register at Companies House. As long as your company is eligible and there are no objections, it will be struck off and cease to exist.   

Although it’s a relatively simple and cost-effective procedure, Voluntary Dissolution is not the most appropriate company closure method in every case. There will be more suitable methods if you have significant cash reserves or assets to distribute to the shareholders or if the company is insolvent.

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How do I wind up my company via Voluntary Dissolution?

You can apply to wind up your limited company if it is solvent and has not traded, changed names or sold any property rights in the past three months. It costs just £8 using the online process. If you cannot apply online, you can submit the paper form DS01 to Companies House along with a £10 fee. Companies House will check that all your details are correct, and as long as you meet the relevant criteria, your company will be struck off the register after around three months. 

Most of the work comes before you apply. You must prepare your business for closure by repaying your creditors, informing all relevant parties (employees, shareholders and clients), filing your statutory accounts and tax return with HMRC, and closing the company’s bank accounts. You must also sell the company’s assets or transfer them away before applying for strike off.

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Can I wind up my own company if it has debts?

Voluntary Dissolution is not an appropriate closure method if your company has debts it cannot pay. Although your application will not be dismissed outright, you must inform your creditors of your intention to dissolve the company, and they can choose to object.  

If they object, the process will pause so your creditors can take action to collect the debt. Even if there are no objections and the company is dissolved, your creditors will be able to apply to the court to reinstate the company at any point in the future. 

You could also be investigated, as your actions suggest you’re attempting to avoid repaying your creditors. As a result, you could receive a fine, be made personally liable for company debts or even be disqualified from acting as a company director in the future.

How do I wind up a company with debts?

If your company has debts it cannot repay (it’s insolvent), you can use a Creditors’ Voluntary Liquidation (CVL) to close it in the right way. You initiate the process by appointing an insolvency practitioner to act as the liquidator. They will sell the company’s assets and distribute the proceeds to the creditors. They’ll then close the company and any remaining debts will be written off.  

Although you have to pay a liquidator’s fee, an often overlooked benefit of a CVL is that you could be eligible to claim director’s redundancy pay. That could more than cover the cost of the liquidation and provide you with a financial buffer while you consider the next step in your career.

What’s the most tax-efficient way to wind up my company?

If your company has cash reserves and assets worth more than £35,000 after you’ve paid all liabilities, a Members’ Voluntary Liquidation (MVL) is likely to be the most cost-effective way to close it down. 

You can initiate an MVL by appointing a licensed insolvency practitioner to act as the liquidator. They will repay any creditors, sell the company’s assets and distribute the proceeds to the shareholders before closing the company down. 

The benefit of an MVL over Voluntary Dissolution is that the proceeds you extract from the company are subject to Capital Gains Tax. You may also be eligible for Business Asset Disposal Relief, in which case you’ll pay just 10% tax on qualifying assets. In the case of Voluntary Dissolution, the proceeds will be treated as income and taxed at a significantly higher rate.   

Need advice?

If you’re thinking about winding up your limited company but are not sure how, we can help. We will explain the most appropriate procedure in your circumstances and guide you on how to do it in the right way. Please get in touch for a free, same-day consultation or arrange to meet us in person at one of our 100+ offices throughout the UK.