Closing Down a Limited Company
Closing down a business holds many options for the Company Director; with all decisions dependent on whether the company is solvent or insolvent.
If you are operating through a limited company then this guide will be useful in explaining how to go about closing down a limited company.
Don’t lose sight of the fact that a business could be rescued either within the existing company or through a sale of the trade and assets to a different company.
Our separate guide to business rescue could be helpful.
Closing an insolvent company
If your company is insolvent then this will mean that the company is struggling to keep up with payments and their liabilities outweigh their assets. If this scenario is what you find yourself in and you do not want to try and rescue your business, the best way to close a limited company is via a Creditors’ Voluntary Liquidation (CVL).
Closing down a business using a CVL is a productive way for the directors & shareholders to take charge of their insolvent company and do the right thing by closing the company formally. This is a director-led process meaning that the directors have come to the decision that their company is indeed insolvent and they want to close the company in the most efficient way possible.
To learn more about the Creditors’ Voluntary Liquidation process click here.
Alternatively if you believe that closing down your business is not the best solution but you want to try and rescue the insolvent company then read more about a Company Voluntary Arrangement here.
Closing a solvent company
If your company is solvent then this will mean that the director may be looking to close down the business due to retirement, ill health or just that the company no longer has a purpose to continue trading. If this is the scenario you find yourself in then the best way to close a limited company is via a Members’ Voluntary Liquidation (MVL).
Closing down a business using an MVL is a tax efficient way for shareholder distributions above £25,000 to receive capital tax treatment rather than being classed as income. It is a much more tax efficient process providing that the shareholder distributions are above the previously stated amount. This process also ensures closing down the business via this route will help to tie up any lose ends that the company may have left behind otherwise.
To learn more about the Members’ Voluntary Liquidation process click here.
Understanding how to close a business is important for a company director as they need to be aware of all of their options depending on what situation the company is in when they decide to close down their business.
How F A Simms & Partners can help
Our Insolvency Practitioners pride themselves on offering confidential and impartial advice. Therefore the information you receive will be all of the available options open to you and your business’s situation.
We have offices nationwide if you would like to arrange a face-to-face meeting, or alternatively our Practitioners will travel to a convenient location to you.