There are a number of reasons why a company may need to be dissolved. The process can be complex, however, our simple guide explains all you need to know about the steps of dissolving a company and how we can help.
What is company dissolution?
Company dissolution is a way of closing (“striking off”) a company and removing it from the registrar of companies, also known as Companies House. Once the process is complete, the business is no longer legally and publicly recognised and is officially a dissolved company.
A company can be dissolved if:
- It is no longer trading (it is dormant).
- It is a subsidiary company and is not needed anymore.
- The directors are looking to retire and no one will take over.
What to do before a company is dissolved?
Before you apply to dissolve a company, there are a number of other steps you need to take. These include:
- Ensuring all parties know about the upcoming closure (which must be done within seven days of submitting your form to Companies House).
- Distributing all business assets to shareholders.
- Shutting down all company bank accounts.
- Paying outstanding debts, or confirming the company can do this.
- Following staff redundancy rules and paying final staff wages.
- Completing a final tax return through HMRC (you must state that this is the last one).
How do I dissolve my company?
To begin the company dissolution process you will need to submit a DS01 form which must be signed by the directors. The form must be sent to Companies House and a copy of the form will then be sent to all important parties. These will likely include: creditors, employees and shareholders. The process can also be completed online through the Companies House website.
Once you have sent the form off, you’ll get a letter from Companies House to let you know if they have the correct details. If they have, your request for company dissolution will be published in the London Gazette. If no one objects, the company will be dissolved two months after the initial notice. Then, a final notice will be published in the Gazette to confirm the company has been officially dissolved.
After the company is dissolved, you need to retain any documents or information relating to the company for the next 7 years.
What happens to debts once a company is dissolved?
Dissolving a company without debts can be a straightforward solution, as demonstrated above.
However, if your company has debt owed to HMRC or creditors which it is unable to payit is likely they will file an objection to the dissolution, as mentioned above. Creditors can also object if they believe your company has not been closed down with the correct information, or has another viable reason for arguing against the closure. Consequently, your application for dissolution will be closed and you will then have to consider another form of company closure such as a Company Voluntary Liquidation (CVL) or Administration.
Company Dissolution vs Liquidation
It is important to note that the dissolution of a company is different from liquidation and involves very different processes. Dissolution is often voluntary and is the best option in straightforward circumstances. However, if there are debts to be paid to creditors then company liquidation is often the best and only course of action.
Like dissolution, Members Voluntary Liquidation (MVL) requires a company to pay off any debts within 12 months. This form of closure differs from dissolution because a liquidator must be part of the process.
Other Alternatives to Dissolving a Company
It is possible for a dissolved company to be restored to the register for up to 6 years after it is closed on Companies House. However, this option incurs significant financial costs.
If you anticipate that you may want to activate the company again after dissolution, registering it as dormant is a better option. This option simply means the company is no longer in business or in trade, but it can be retrieved at any time to begin again.
Advice on Dissolving a Company
The Insolvency Experts provide business debt advice and guidance, helping your company to take the best course of action if it is facing financial difficulties. Contact us online or speak to our specialists directly by calling us on 0300 303 8284.