Posted on: Tuesday 22nd December, 2020
Dissolving a company means your business closes down, and is removed from the register at Companies House. You can dissolve your company yourself, and this is an inexpensive option, but there are broader issues that you also need to consider before taking this route.
So what is dissolution in more detail, and how much does it cost to dissolve a company?
Company dissolution is a process that you can carry out with no professional support, but a key eligibility requirement is that your company is solvent. This means there are sufficient funds to repay all business debts, plus interest, within a 12-month period.
It isn’t a process for businesses that have entered insolvency, and your creditors may challenge an application if you try to go ahead. Part of the procedure involves notifying all creditors of your intention to dissolve the company, and an advert is also placed in the Gazette.
Creditors can make a claim to recover their debts even after the company has been removed from the register. In fact, this is one of the dangers of voluntary dissolution – the potential for your company to be restored at a later date.
It costs £10 to voluntarily dissolve a company - you can make an application online or by post to Companies House. This is an inexpensive option when you want to close down a company that’s solvent – perhaps if you’re retiring, or want to move on to other ventures – but there are specific benefits in entering voluntary liquidation.
If you suspect that your company may be insolvent, however, it’s crucial to seek a professional opinion on this. A licensed IP will be able to advise on your legal obligations as a director in this situation, and provide reliable unbiased guidance on your best options.
Creditors’ Voluntary Liquidation (CVL) is a formal procedure for insolvent companies, and places the interests of creditors first. It must be administered by a licensed insolvency practitioner (IP), and although it’s significantly more expensive than dissolution, you may be able to claim director redundancy to cover the cost.
If your company is insolvent and you don’t prioritise creditor interests, you could face allegations of misconduct or wrongful trading. Personal liability might then become an issue, in addition to potential disqualification for up to 15 years.
The average director redundancy claim currently stands at £9,000, so it’s worthwhile considering voluntary liquidation over company dissolution, not only for this reason but also to protect yourself and other directors from the serious ramifications of making the wrong choice.
To find out more about dissolving or liquidating your company, and also whether you’re eligible for director redundancy, please contact our experts at CFS Redundancy Payments. We can arrange a free consultation in complete confidence, help you understand your options, and then take the most suitable path.
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If you are looking to close your limited company, you may have attempted to strike it off by submitting a DS01 form to Companies House. This process is also sometimes referred to as dissolving or company dissolution.
A Creditors’ Voluntary Liquidation (CVL) is an official procedure whereby a company’s assets are liquidated in order to pay creditors. It’s typically initiated by directors when their company becomes insolvent and there is no hope of business recovery.
May I take this opportunity to thank you and your team for all your professional help in securing for myself and my wife, redundancy pay. I would have no hesitation in recommending CFS to assist them.Tom Harrison Managing Director of a construction company