Closing down a company

If your company is solvent

Voluntary Striking Off

This is available to a company which is:

• not insolvent and
• has not operated in the three previous months.

It can be a useful and inexpensive way to close a company that is solvent but no longer required. However, if you think it may be needed again in the future then it might be better to make it dormant. Dormant means that your Company is not carrying out any activities and doesn’t have any other income e.g from investments. You can apply to be dormant for corporation tax or dormant for Companies House.

Apply to Companies House to be struck off the register and dissolved.

Members voluntary liquidation

This process can be used if:

• the company is solvent
• the members want to end it
• the voluntary striking off procedure is not suitable.

Members must pass a special resolution for the company to be wound up voluntarily.

The process starts with a majority of directors making a declaration of solvency confirming they believe the company will be able to pay its debts, plus any interest in full within a specific period of time and which can’t be more than 12 months from the start of the winding up.

Voluntary liquidation usually starts as soon as the resolution of voluntary winding up is passed. A liquidator is appointed, and the company ceases to operate except as far as is required to wind up. However it continues to exist as a company until it is dissolved.

The disadvantage of a members’ voluntary liquidation is that it costs more. The advantages are that the company cannot generally be restored to the register, and the process is managed by a liquidator who is appointed at a liquidation meeting. If an unexpected liability arises that makes the company insolvent, the voluntary liquidation can relatively easily be converted into insolvent liquidation.

Companies House have in-depth guidance on this process.

To find a liquidator, you can use the search facility on Institute of Chartered Accountants in Scotland (ICAS).

If your company is insolvent

Creditors voluntary liquidation

This process starts with the members of the company passing a special resolution to say that the company cannot continue operating because of its liabilities and that it’s advisable to wind up.

The aim of a creditors voluntary winding up is to realise assets and make sure that as much money as possible is made available to those who are entitled to it (the creditors). Creditors can have their say in relation to the appointment of a liquidator and they can vote on any resolutions proposed by the liquidator for distributing the company’s assets.

Compulsory liquidation

This is where a court winds up a company. Sometimes a creditor (someone you owe money to) might issue a petition as a way of making you pay money owed to them . But the company itself can also apply to court to wind up. If the petition is accepted, then the court makes a winding up order and appoints the official receiver or an insolvency practitioner as liquidator. The process is then similar to the process in the creditor voluntary winding up, but it is completely under the jurisdiction of the court.