How to Close a Limited Company in the UK: A Complete 2025 Guide to Strike Off and Liquidation
You have decided to dissolve your limited company. You may be ready to retire, a cool new project is calling, or your finances aren’t working out. Whatever the reason, it’s important to understand how to close a limited company properly.
In the UK, there are different ways to close a limited company. The best way depends on whether your business can pay what it owes. This guide will show you how to do it, what to do, and what to consider in order to close your business properly.
Why Might You Close a Limited Company?
Directors decide to close limited companies for many reasons. Here are some common ones:
• No longer trading: The business has served its purpose and isn’t needed.
• Retirement or a career change: You may not want to run the company anymore.
• Financial difficulty: The business can’t pay what it owes or make any money.
• Administrative burden: The regular reports and taxes take too much time or cost too much.
Whatever the reason, it’s important to do things according to the law.
What is a Solvent Company?
A solvent company is financially healthy and stable. It means the company has sufficient funds, resources, and assets to settle all of its debts when they become due. Even if the business ceased operations today and sold everything it possessed, it would still have more than enough cash on hand to pay off all of its debts, including those owed to suppliers and employees.
For instance, if a business has £70,000 in assets and only £30,000 in debts and loans. They could easily be paid back, and it would still have £40,000 left over. This means the company is solvent. Here are generally two routes you can take to close a solvent company:
• Strike Off: This is the easier and cheaper method in which your company has just been taken off the Companies House register.
• Members’ Voluntary Liquidation (MVL): This is a more official process. People usually do this to take out larger sums of money in a tax-smart way.
When you’re solvent, you have more say in how the company closes, and you can be sure everyone gets paid what they’re owed.
What Is an Insolvent Company?
An insolvent company is a business that is no longer able to meet its financial obligations. In simple terms, it either does not have enough money to pay bills, staff wages, suppliers, and loans when they are due, or the total amount it owes is greater than the value of everything it owns.
For example, if a company owns assets worth £100,000 but its debts add up to £150,000, even selling everything it owns would not be enough to repay what it owes. That company would be insolvent. Here are two methods to close an insolvent company:
• Creditors’ Voluntary Liquidation (CVL): It is a common process where directors can decide to voluntarily close the business if they are aware that it cannot pay its debts.
• Compulsory Liquidation: When a company is unable to pay its debts, a creditor can ask the court to shut it down. If the court approves, the company’s assets are sold, and the money is used to pay back what is owed to creditors.
Insolvency puts a business at risk, prompting creditors to take legal action to recover debts. This situation might force the company into liquidation or administration to sell assets for creditor repayment.
Methods of Closing Down a Limited Company
The following are the primary methods used in the UK to close a limited company:
- Strike Off a Company
A company strike-off is the easiest and cheapest way to close a limited company that can pay what it owes. It’s basically taking the business off the official Companies House list.
To do it, you fill out Form DS01 and pay a small fee. But before you send it in, make sure you’ve done these things:
• Paid back all the company’s debts.
• Filed all late accounts and tax paperwork with HMRC.
• Paid any Corporation Tax, VAT, and PAYE you owe.
• Closed the company’s bank accounts.
• Told all key parties involved, including employees, shareholders, creditors, and anyone else the company has outstanding obligations to.
• Divided up any leftover stuff among the shareholders.
Once Companies House reviews your request, they’ll post a notice about it. If no one objects within two months, the company is officially gone. - Members’ Voluntary Liquidation (MVL)
If your company can pay its debts but wants to close the limited company permanently, you might go with a Members’ Voluntary Liquidation. It’s more official than just closing the company, and you’ll need an insolvency expert who’s licensed to do it.This expert will:
• Sell what the company owns.
• Repay those to whom the business owes money.
• Give any money left over to the shareholders in a way that saves on taxes.
• Directors usually use this method when they want to take out a good chunk of money while keeping taxes low. - Creditors’ Voluntary Liquidation (CVL)
If your business can’t pay what it owes, you can’t just shut it down. You might have to do what’s called a Creditors’ Voluntary Liquidation.
Here’s how it works:
• An expert takes over managing the company.
• They sell off what the business owns to pay back as much as possible to those owed money.
• Once that’s done, the company closes down for good.
• Although going through liquidation is difficult, it ensures that the company’s executives follow the rules and avoid being accused of wrongdoing. - Compulsory Liquidation
When a court orders a business to close because it is unable to pay its debts, this is known as compulsory liquidation.This procedure is:
If a creditor is owed £750 or more and the debt remains unpaid, they can apply to the court for a winding-up order. If the court agrees, it will appoint a liquidator to take control of the company, sell its assets, and distribute the funds to repay creditors as much as possible. Once this process is complete, the company will be removed from the Companies House register, the directors will lose control, and the business will officially close down.
However, the process usually starts with a statutory demand for payment before the petition is filed. Creditors typically take this step as a last resort due to the costs involved. Also, there are legal opportunities for the company to defend the petition or reach an agreement to avoid liquidation.
How To Close A Limited Dormant Company?
A dormant company is basically a limited company that’s registered but isn’t doing any actual business. It doesn’t have income or expenses, and there aren’t any big transactions happening in its accounts. People often create these companies to reserve a business name or plan to use it later on.
Process Of Closing A Limited Dormant Company
If you don’t need your company anymore, the easiest way to shut it down is by applying to have it struck off the register. Just send Form DS01 to Companies House, as long as your company meets these conditions:
• Not traded in the last 3 months.
• No debts or outstanding obligations
• Closed any company bank accounts
Following approval of the application, the business will be struck from the Companies House register and will formally dissolve.
Difference Between Liquidation and Dissolution
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Liquidation
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Dissolution
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A formal process exists where a licensed professional is selected to close a company's business.
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Company dissolution, often started by directors using a strike-off request, is an administrative way to remove a business from the Companies House register.
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Liquidation happens when a business needs to pay off debts or sell its assets. The business gathers its assets, sells them, and then gives the money to those it owes. If there's money left after paying creditors, shareholders get it.
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A business might also use liquidation if it has no debts, isn't required to do anything else, and has no more assets to give out.
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This applies to both solvent companies, through Members’ Voluntary Liquidation, and insolvent ones, through Creditors’ Voluntary Liquidation or Compulsory Liquidation.
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This process is mainly for solvent companies that are either inactive, dormant, or simply no longer needed. It's not an option if the company has debts or ongoing legal issues.
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The company is dissolved at the end, but only after debts to creditors are settled as much as possible and legal obligations are satisfied.
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Once the dissolution gets approved, it's the last step. The company is then removed from the registry and no longer exists legally.
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Formal insolvency requires court or creditor supervision, legal filings, and adherence to insolvency law, increasing time and expense.
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The method is usually faster and less expensive, with simpler legal needs and little regulation.
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Step-by-Step Guide to Closing a Limited Company
Here’s what you need to do when you’re closing a limited company:
- Pick a method: Decide if you’re going to strike off the company or use liquidation.
- Pay off debts: Settle what you owe to HMRC, creditors, and lenders.
- Deal with staff: Pay their final wages, give redundancy if needed, and let everyone know what’s happening.
- Submit final accounts: File your corporation tax, VAT, and payroll submissions.
- Close company bank accounts: Make sure there’s no money left in the company’s bank accounts before closing.
- Share assets: Distribute any remaining money or property to the shareholders.
- File the paperwork: Use form DS01 to strike off the company, or hire an insolvency expert for liquidation.
- Get confirmation: Companies House will tell you when it’s all done.
Mistakes to Avoid When Closing a Limited Company
Directors often mess up when closing a limited company, which can lead to delays, fines, or even personal liability. Some common errors include:
• Applying for a strike-off with unpaid debts
If a company has debts, it can’t be removed from the Companies Register. HMRC or those owed money can object, which means the removal won’t happen, or other steps will be taken.
• Failing to file final accounts with HMRC
Directors must submit their corporation tax, VAT, and PAYE returns on time. If you don’t, you could face fines and extra liabilities.
• Leaving money in the company bank accounts before closure
Once a company shuts down, any money left in its account gets frozen, and shareholders can’t access it.
• Not informing creditors or employees properly
Make sure to pay your creditors and employees what you owe them. If you don’t, the directors could face legal issues.
• Overlooking the director’s responsibilities during insolvency
When a company can’t pay its bills, the directors are legally required to think of the creditors first. Failure to do so may result in personal liability or disqualification from serving as a director.
Avoiding these typical errors when closing a limited company can help make the process easier and compliant, lowering your risk.
Key Documents and Forms You’ll Need
When you choose to close a limited company, you need to prepare and submit some documents and forms. These include:
• Form DS01: Applied to Companies House for a voluntary strike-off.
• Final Accounts: Submitted to HMRC before the dissolution.
• Final Corporation Tax Return (CT600): Includes every trade up until the closing date.
• Board Resolution: A formal consent from the directors to move forward with liquidation or strike-off.
• Declaration of Solvency (for MVL): A legal declaration stating that the business can settle all of its debts in a year.
It is crucial to make sure these documents are accurate and filed on time. Without them, your attempt to close a limited company may be delayed by objections from Companies House or HMRC.
Can I Reopen a Firm That Was Previously Dissolved?
A company that has been dissolved is no longer a legal entity and has been struck from the Companies House register. However, in some cases, it may be possible to restore the company.
There are two primary ways to revive a company that has been dissolved:
1. Administrative Restoration
• Accessible if the business was shut down by Companies House (not the directors’ choice). You must apply within 6 years of dissolution.
• At the time of its dissolution, the business had to be operating.
• Penalties must be paid, and any missing accounts or confirmation statements must be filed.
2. Court Order Restoration
• Used when there is no administrative restoration available or when the company was voluntarily struck off.
• A request to restore the company is made to the court.
• It can be more expensive and typically calls for legal assistance.
• If approved, the company is placed back on the Companies House register.
After being restored, the business is allowed to resume operations as if it had never been dissolved.
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