In Short
- Company dissolution removes a company from the Companies House register and ends its legal existence.
- To dissolve a company voluntarily, it must be solvent, inactive for at least three months, and have no ongoing legal matters.
- Directors must settle all debts, distribute assets, and notify relevant parties before applying, or they risk fines, disqualification, or legal action.
Tips for Businesses
Before dissolving your company, ensure you have paid off all debts, closed accounts, and informed creditors, employees, and HMRC. Failing to follow the correct process could lead to objections, legal action, or personal liability for directors. Seek legal advice if you are unsure about your obligations.
Table of Contents
- Why Dissolve a Company?
- Types of Company Dissolution
- Conditions for Voluntary Dissolution of a Company
- Considerations Before Dissolving a Company
- How Do I Voluntarily Dissolve My Company?
- Implications of Company Dissolution
- What Risks are Involved in Dissolving a Company?
- Key Takeaways
- Frequently Asked Questions
Company dissolution (also known as ‘striking off’) is the process of removing a company’s name from the register of companies kept at Companies House and ending its legal existence.
A company is its own legal entity with the right to enter into contracts, initiate lawsuits, and be the subject of lawsuits. Dissolution is effectively the death of a company, and any legal rights the company had cease to exist upon dissolution.
This article explains how to dissolve a company in the UK, the steps involved, legal risks, and what directors must do before applying.
Why Dissolve a Company?
Shareholders and directors dissolve companies for a variety of reasons, but usually because they decide the company is no longer necessary. Running a company incurs regular filing fees; if the company is not trading, it will incur filing fees for no reason.
Often, a company may have ceased trading or never started trading before deciding to pursue dissolution. This can occur when key personnel within the business leave, or if a company is unable to secure sufficient capital to commence trading.
Types of Company Dissolution
The members voluntarily dissolve a company when they actively take steps to close it.
Companies House dissolves a company involuntarily when it strikes the company off the register. Companies House will do this if the company fails to file confirmation statements, tax returns, or annual accounts.
Continue reading this article below the formConditions for Voluntary Dissolution of a Company
A company can be subject to voluntary dissolution provided that it satisfies all of the following requirements:
- it has not traded for at least 3 months;
- it has not changed its name for at least 3 months;
- it is not the subject of any legal proceedings;
- it is solvent (meaning it has enough cash to pay off all debts);
- it is not in or about to enter liquidation (being when a company wants to dissolve but has outstanding debts); and
- it is not in a credit agreement.
Considerations Before Dissolving a Company
If you are considering dissolving your company, make sure you finalise the company’s affairs before Companies House strikes it off. When this happens, the bank will freeze the company’s accounts, and the crown will take ownership of any cash or assets the company still holds.
Prior to dissolution, you should ensure:
- all assets are distributed amongst shareholders;
- employee wages are paid and proper redundancy procedures are followed where appropriate;
- payment of any outstanding tax including corporation tax, PAYE, NI and any other relevant taxes;
- filing final accounts and tax returns with HMRC;
- request that HMRC close down your payroll scheme and deregister the company for VAT;
- pay any outstanding debts;
- close company bank accounts; and
- inform all notifiable parties and HMRC of your plans to dissolve the company.
How Do I Voluntarily Dissolve My Company?
The directors can voluntarily dissolve a company by submitting an application to Companies House and paying the application fee, provided the company meets the eligibility criteria. Before making an application, the directors must first get approval from the shareholders. The company’s articles of association set out the procedure for obtaining consent.
Upon receipt of your application, Companies House will file a notice in the Gazette confirming your intention to dissolve your company. The Gazette will publish the notice and keep it active for 3 months. This allows time for others to object to the dissolution. If you are attempting to dissolve the company while you still have outstanding debts, it is likely that your creditors will submit an objection to your strike-off application. If no one objects within the 3-month period, Companies House will strike your company off the register and remove it from existence. However, Companies House will maintain a record of your company’s existence for an additional 20 years.
Implications of Company Dissolution
Once Companies House dissolves the company, it no longer exists. You cannot continue to trade through that company. If you do, you may become personally liable for any debts the company incurs.
What Risks are Involved in Dissolving a Company?
Dissolving a company may seem straightforward, but directors and shareholders must follow the correct procedure carefully. If the company provides false information or fails to notify a required party, the directors risk fines, disqualification, or even prison sentences.
Creditors can also apply to restore your company if they believe you dissolved it improperly. Once restored, they can continue pursuing the company for any outstanding debts.
Key Takeaways
Dissolving a company removes it from the Companies House register and ends its legal existence. Companies can choose to dissolve voluntarily if they meet specific conditions, such as not trading for three months and remaining solvent. Before applying, directors must settle all debts, distribute assets, and notify all relevant parties. If directors fail to inform creditors properly, creditors can object to the dissolution or apply to restore the company. Directors who do not follow the correct process risk serious consequences, including fines or disqualification.
If you need assistance with company dissolution, our experienced corporate lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to solicitors to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
To dissolve your company, you must get shareholder approval and submit an application to Companies House. You must pay any outstanding debts, close company accounts, distribute remaining assets, and notify all relevant parties. Companies House will publish a notice and proceed with the dissolution if no one objects within three months.
If you dissolve your company without settling its debts, creditors can object to the dissolution or apply to have the company restored later. Directors who provide false information or fail to notify creditors risk fines, disqualification, or even imprisonment. It is essential to settle all liabilities before dissolution.
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