How to Close a Limited Company: A Step-by-Step UK Guide

The main ways to close a UK limited company are:

• Voluntary strike off
• Creditors’ Voluntary Liquidation
• Members’ Voluntary Liquidation
• Compulsory liquidation

The most suitable option depends on the company’s financial position, the value of its remaining assets and whether creditors are likely to object.

A company is generally solvent if it can pay its debts in full as they fall due and its assets are worth more than its liabilities.

A company may be insolvent if:

• It cannot pay suppliers, lenders or HMRC on time
• Wages or other employment costs are overdue
• Its liabilities exceed the value of its assets
• It relies on further borrowing to meet existing debts
• Creditors have started legal action
• A statutory demand or winding-up petition has been threatened
• The company has no realistic prospect of repaying what it owes

This distinction is important because a solvent company and an insolvent company will usually require different closure processes.

Once directors know the company’s true financial position, they can compare the available options.

Voluntary strike off, also called company dissolution, is usually the simplest and cheapest way to close a solvent limited company.

The company is removed from the Companies House register and legally ceases to exist.

Strike off may be suitable where:

• The company has stopped trading
• It can pay or has already paid its debts
• Employees have been properly dealt with
• Company assets have been distributed or transferred
• Tax returns and accounts are up to date
• No legal proceedings or formal insolvency procedures are underway
• Creditors are unlikely to object

A company cannot apply for voluntary strike off if, during the previous three months, it has traded, changed its name or sold assets that it would normally have sold while trading.

It must also not be threatened with liquidation or subject to an agreement with creditors such as a Company Voluntary Arrangement.

Directors can apply online or submit a paper DS01 form. The application must be approved by a majority of the company’s directors.

The current Companies House application fees are:

• £13 for an online application
• £18 for a paper application

For a full explanation of the requirements and objection process, read our company strike-off guide.

A Creditors’ Voluntary Liquidation is a formal closure process for an insolvent company.

It may be appropriate where the company cannot repay HMRC, suppliers, lenders, employees or other creditors.

The directors begin the process and shareholders must approve the liquidation. A licensed insolvency practitioner is then appointed to act as liquidator.

The liquidator will:

• Take control of the company
• Identify and sell its assets
• Review creditor claims
• Distribute available funds
• Investigate the company’s affairs
• Report on the conduct of its directors
• Complete the company’s closure

A CVL can provide an orderly alternative to waiting for a creditor to issue a winding-up petition.

It does not automatically make directors personally responsible for company debts. However, separate liabilities may remain where a director has signed a personal guarantee, owes money through an overdrawn director’s loan account or has breached their legal duties.

A Members’ Voluntary Liquidation is used to close a solvent company formally.

The directors must be able to declare that the company can pay all its debts, including interest, within 12 months.

An MVL is often considered where:

• The company has substantial retained profits
• It holds valuable assets
• Shareholders expect a significant final distribution
• The owners are retiring
• A contractor or consultant is closing a personal service company
• The company is no longer required following a sale or restructuring

A licensed insolvency practitioner must be appointed.

An MVL costs more than strike off, but it may provide a more structured and potentially tax-efficient way to distribute substantial company funds.

Compulsory liquidation is normally initiated by a creditor rather than voluntarily by the company’s directors.

A creditor may present a winding-up petition if it can demonstrate that the company cannot pay what it owes.

If the court issues a winding-up order, the Official Receiver will usually take control of the company initially.

Compulsory liquidation is not usually a route directors deliberately choose. Taking advice before a winding-up petition reaches court may leave more options available.

Stopping trading does not itself close a limited company.

The company continues to exist until it is formally struck off or removed from the register following liquidation.

When preparing to close, directors may need to:

• Stop accepting new orders
• Complete or terminate existing contracts
• Collect outstanding customer payments
• Inform suppliers and customers
• Cancel direct debits and subscriptions
• End leases or finance agreements
• Protect company records
• Avoid increasing creditor losses

An insolvent company should not continue trading where there is no reasonable prospect of avoiding further losses to creditors.

Directors should seek professional advice where they are uncertain whether continuing to trade is appropriate.

Employees must be dealt with correctly before the company closes.

Depending on the closure route, this may include:

• Giving employees the required notice
• Paying outstanding wages
• Paying accrued holiday entitlement
• Calculating redundancy payments
• Issuing final payslips
• Providing P45 forms
• Informing HMRC that the PAYE scheme is ending
• Completing pension-related obligations

Where an insolvent company cannot pay employee claims, eligible employees may be able to claim certain amounts from the National Insurance Fund.

Directors who are also employees may sometimes qualify for redundancy and other statutory payments, depending on their working relationship with the company.

Directors should prepare an accurate list of everything the company owes.

This may include:

• Corporation Tax
• VAT
• PAYE and National Insurance
• Bank loans and overdrafts
• Bounce Back Loans
• Asset finance
• Supplier invoices
• Rent and business rates
• Employee claims
• Director’s loans
• Personal guarantees

A solvent company should make arrangements to pay its liabilities before it is struck off.

If the company cannot pay its debts, creditors may object to dissolution. A creditor can also apply to restore a dissolved company to the register in certain circumstances.

Strike off should not be treated as a way of making unpaid company debts disappear.

Where significant debts remain, compare your options in our guide to company strike off vs liquidation.

All company assets should be identified and dealt with before dissolution.

Assets may include:

• Money in company bank accounts
• Property
• Vehicles
• Equipment
• Stock
• Intellectual property
• Websites and domain names
• Customer debts
• Tax refunds
• Insurance claims

If assets remain in the company when it is dissolved, they may pass to the Crown as Bona Vacantia.

The company bank account will also be frozen after dissolution.

Directors should therefore close or transfer accounts and dispose of company assets before completing a strike-off application.

In a CVL or MVL, the appointed liquidator will take control of company assets and deal with them through the formal process.

A company that has traded should normally complete its final accounting and tax obligations before closure.

This may involve:

• Preparing final statutory accounts
• Submitting a final Company Tax Return
• Paying outstanding Corporation Tax
• Cancelling VAT registration
• Submitting a final VAT return
• Closing the PAYE scheme
• Paying outstanding payroll taxes
• Informing HMRC that the company has stopped trading
• Keeping company records for the required period

A company that was formed but never traded should tell HMRC that it remained dormant and is being closed.

The exact requirements will depend on the company’s history, tax registrations and chosen closure route.

Applying for strike off

Directors can apply to Companies House online or by submitting form DS01.

More than half of the company’s directors must approve the application. If the company has two directors, both must agree.

Within seven days of submitting the application, a copy must be sent to relevant parties, including:

• Shareholders
• Creditors
• Employees
• Pension trustees or managers
• Directors who did not sign the application

Companies House will publish a notice in The Gazette.

If no valid objection is received, a second notice will eventually confirm that the company has been dissolved.

Starting a CVL or MVL

A formal liquidation cannot be completed without a licensed insolvency practitioner.

The insolvency practitioner will prepare the required documents, guide the directors through the shareholder decision and manage the company’s affairs after appointment.

A straightforward voluntary strike off normally takes at least three months from application to dissolution, although objections and administrative issues can make the process longer.

A company can often enter a planned CVL within approximately two to three weeks. However, the liquidation itself may remain open for several months while assets, creditor claims and statutory investigations are completed.

An MVL may also remain open for several months, although initial distributions can sometimes be made before the liquidation formally concludes.

Read our full guide to how long it takes to liquidate a company for a detailed breakdown.

The cost depends on the process used.

Voluntary strike off costs £13 online or £18 using the paper form. Additional accounting or legal costs may apply if the company’s affairs need to be finalised first.

CVL and MVL costs vary according to:

• The company’s financial records
• The number of creditors
• The number and type of assets
• Employee claims
• Legal disputes
• The level of investigation required
• The complexity of shareholder distributions

A straightforward liquidation will normally cost considerably more than strike off because a licensed insolvency practitioner must manage the formal procedure.

For current estimates and a breakdown of what the fees cover, read our guide to the cost of liquidating a company.

You can also compare the cheapest ways to close or liquidate a company.

A company with debts can potentially apply for strike off, but the application does not prevent creditors from objecting or pursuing what they are owed.

Strike off is not an alternative to dealing with insolvency properly.

Where the company cannot pay its debts, directors should consider:

• Whether further funding or restructuring is realistic
• Whether a Company Voluntary Arrangement could allow continued trading
• Whether administration could protect and rescue the business
• Whether a CVL offers the most appropriate closure
• Whether creditor action makes compulsory liquidation likely

Directors should not transfer assets, favour selected creditors or take money from the company without considering their duties to creditors.

Once a company has been dissolved:

• It no longer legally exists
• It cannot trade
• Its bank accounts are frozen
• It cannot enter contracts
• Remaining company assets may pass to the Crown
• Its name becomes available for possible future use
• Company documents should still be retained where legally required

Dissolution does not necessarily prevent later action.

A creditor or another eligible party may be able to apply to restore the company to the register. Restoration may allow unresolved debts, claims or assets to be dealt with.

Yes. A company that never traded can usually be closed through voluntary strike off, provided it meets the eligibility rules.

Directors should:

1. Confirm that the company has never traded
2. Check that it has no unpaid liabilities
3. Deal with any share capital or remaining assets
4. Inform HMRC that the company was dormant
5. Apply to Companies House for strike off
6. Send copies of the application to the required parties

Do not leave money in the company bank account or other assets in the company’s name before dissolution.

Strike off may be appropriate when:

• The company is solvent
• It has stopped trading
• Its debts and taxes can be resolved
• Few assets remain
• No creditors are expected to object
• Its affairs are simple

A CVL may be appropriate when:

• The company cannot pay its debts
• HMRC or suppliers are applying pressure
• Employees or lenders are owed money
• Assets need to be dealt with formally
• Creditor action is likely
• The directors want an orderly voluntary closure

An MVL may be appropriate when:

• The company is solvent
• Significant profits or assets remain
• All liabilities can be paid within 12 months
• Shareholders require a formal distribution process
• The financial outcome may justify the professional fees

Choosing the wrong closure process can lead to creditor objections, delays, lost assets or additional costs.

Business Helpline can review the company’s financial position and explain whether strike off, CVL, MVL or another option is likely to be appropriate.

Our team can help you understand:

• Whether the company is solvent or insolvent
• What needs to happen before closure
• How debts and assets will be dealt with
• The likely cost and timescale
• Whether creditors could object
• Whether formal liquidation is required

Contact Business Helpline for a free and confidential discussion about closing your limited company.