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By miguel-ingles
- In Uncategorized
The UK is one of the more attractive European markets for setting up corporations. However, at a given time and due to different reasons, the owners may decide to close them. In this article, I will explain the different methods to wind up a company in the UK.
Members’ Voluntary Liquidation
The first way to wind up a company in the UK is via a Member’s Voluntary Liquidation (MVL). If the company is solvent, it means that it has enough assets to pay the liabilities, and the directors will be able to apply for one. During the process, the business must pay its debts, conclude their legal disputes and pay the money they owe to the creditors using the assets it owns. Everything that it is not necessary to be sold, will be shared among the partners.
Opting for this type of liquidation request has its benefits. In case that, after clearing all its debts, the company still possesses goods with a value superior to 25 000 GBP; it will be more efficient from an economic point of view to choose this type of application. The taxes are limited to a 10%, but if shareholders were to withdraw the assets as dividends, the tariffs will go up until a 50%. However, as a con, this process may take longer than other types of liquidation requests.
The process starts with a voting in the General Meeting, in which, at least, a 75% of the shareholders must be in favour of winding up the business. The next step will be to write a declaration of solvency. Then, the directors will hire an administrator, who will settle the legal conflicts, will pay the creditors, will sell the assets of the company (if necessary) and distribute the rest among the partners, and will complete all the paperwork. At last, the Companies House will eliminate the company from the register.
Creditors’ Voluntary Liquidation
A Creditor’s Voluntary Liquidation (CVL) is the direct consequence of the insolvency of a company. This means that it has more liabilities than assets. There are two ways to apply for this request. The first one would be that directors and shareholders agree to wind up the corporation because they think that the business’ financial problems are unsolvable. The second one would be that creditors file a dissolution petition of a company to a judge due to defaults. They might accept the request and order the liquidation of the company.
The process is similar to the previous one, but with some differences. You must write a declaration of insolvency. Also, shareholders and unsecured creditors will not get any compensation whatsoever.
Strike-Off Request to Wind Up a Company in the UK
With a strike off request, directors can decide to dissolve a corporation and remove it from Companies House. Usually, they come to this decision due to fulfilling the object of the company.
To dissolve a business, it must comply with certain requisites. First, it must not have traded or sold any product or change its name in the last three months. Second, it has not threatened with liquidation. And third, it has no effective agreements with creditors. In the case the company does not comply with any of the previous requirements, you may opt for a members’ voluntary liquidation.
The first step of the process will be to notify both His Majesty’s Revenue and Customs (HMRC), partners, creditors, and employees about the intentions of the directors. You must also send the Companies House the DS01 form, which most of the directors must sign. Then, you must proceed with firing the employees, following British labour laws. After this, you will share the company’s assets among the shareholders. The next step will be to prepare the final accounts and file them along with the taxes the company owes. You must send both to the HMRC.
At last, and if the process was correct, the authorities will publish the request in The Gazette, the Public Record. If, after two months, nobody objects, the company will be dissolved, and Companies House will eliminate it from the register.
You must keep in mind that, if you owe tariffs or penalties or if you have not filed a tax declaration, HMRC may refuse to the dissolution of the business. In addition, you will also lose access to the company’s commercial bank accounts, so you will not be able to send or receive money from them.