There are three type of liquidations:
This is a process in which you can choose to liquidate an insolvent company that can’t pay its debts and the shareholders agree and pass a ‘winding-up resolution.’
This is a process whereby a creditor attempts to force your company out of business in order to recover any debts owed to them. This is an extremely serious process and can have severe consequences on your future business reputation.
This is a tax-efficient way to liquidate a solvent company that you have no use for anymore.
These are all formal insolvency proceedings and UK law dictates that they can only be carried out by a licensed insolvency practitioner.
So no, you cannot liquidate your company yourself.
For a CVL and an MVL, the directors appoint an insolvency practitioner of their choice. However, in a Compulsory Liquidation, the decision is taken out of the directors’ hands; it is the Courts who decide which insolvency practitioner is appointed.
You can voluntarily strike off your solvent company yourself
The process of striking off your company from the Companies House Register can be used if your solvent company has fulfilled the purpose it was initially set up for. However, you can only use this option to close down your company if it:
- hasn’t traded or sold stock for the last 3 months.
- hasn’t changed names in the last 3 months.
- hasn’t been threatened by liquidation.
- has no agreements in place with creditors, such as a Company Voluntary Arrangement (CVA).
However, many company owners prefer to go down the Members’ Voluntary Liquidation (MVL) route if they want to close down their solvent company because even though it’s more expensive than a Voluntary Strike Off, due to the fact that you must appoint a liquidator, there are considerable tax savings to take into account for the directors.
This is because any funds to be distributed are subject to capital gains tax, rather than income tax, which could result in you saving thousands of pounds. Plus, if you qualify for Entrepreneurs’ Relief (ER), you can benefit from a 10% marginal rate on distributions.
So, before you strike off your solvent company, speak to us (or your Accountant) for advice on whether it is more financially beneficial to liquidate your company via an MVL.
We’ll give you the best advice tailored to your specific needs: 0161 907 4044 / [email protected]