Closing your limited company

​If your limited company is insolvent you have a duty as a director to consider whether to stop trading. If you do stop trading you then need to decide on the best way to dissolve (close) your limited company.

See our fact sheet:

Limited companies.

Your company is insolvent if:

  • it cannot pay its debts as they fall due;
  • it does not have assets, that if sold would pay off all the debts in full; or
  • it cannot pay its debts as they fall due and it does not have enough assets to sell to pay off the debt in full.

The way you close your limited company will depend on the amount of assets your company has.

Creditors' voluntary liquidation

As a director, you can employ the services of an insolvency practitioner (IP) to close your business. Your company will need to have some money or assets that can be sold to pay the IP's fees.  The fees are normally around £4,000 to £7,000 depending on the size of your business and how much work will be needed to close your business down.

An IP will sell any company assets, pay company creditors, deal with the affairs of your company and then close your company. They will also investigate your conduct as a director. If there are any company debts still owing, these are written off when the company closes. Any debts that you owe personally, for example if you have given a personal guarantee, will still need to be paid by you.

You can see more about creditors' voluntary liquidation at www.gov.uk.

Compulsory liquidation

You can consider this option if your company does not have enough money to employ an IP. As a director you can apply to the court to make a court order to wind up (make bankrupt) your company. A creditor can also apply to the court if you owe them £750 or more.

There is a fee to make this application and a solicitor should be used to help complete it. The fee (including solicitors' costs) would normally be up to £3,000.

The court will use a liquidator (the Official Receiver) to sell company assets, pay company creditors, deal with the affairs of your company and then close your company. They will also investigate your conduct as a director. If there are any company debts still owing, these are written off when the company closes. Any debts that you owe personally, for example if you have given a personal guarantee, will still need to be paid by you.

You can see more about compulsory liquidation at www.gov.uk.

Strike off

If your company is insolvent and it cannot afford to pay for liquidation, you can consider striking off the company.
This means that you make an application to Companies House to remove your company name from their register.
The application will cost you £10 and you can only apply once your company has stopped trading for three months. You need to send a copy of the application to any interested parties (such as creditors) within one week of sending it to Companies House. In that time you could also invite your company creditors to apply to liquidate your company at their own cost.

Once your application to strike off is made, as long as no one objects, Companies House will remove your company name from their register. This means that any company debts are written off as they can no longer be recovered by the creditor. Any debts that you are personally liable for, for example if you have given a personal guarantee, will still need to be paid by you.

You can see more about strike off at www.gov.uk.

Administration

There is also an option called administration that you could consider if your limited company is insolvent. You or the court can instruct an insolvency practitioner to carry out the administration. They will look at restructuring your company to help it carry on trading. They will also consider whether the best option is to sell assets to pay creditors, and then close your company.

If you would like more information about administration, contact us for advice.