If you are a company director looking to close a limited company, you might be considering striking off, or dissolving the company.
This can be a good option for certain businesses, however it is not a route that any business can take.
To help establish whether this is the best way forward for you, in this guide Clarke Bell outlines what the process involves, who can take this route and how to use form DS01 to strike off a company in 2022.
How to dissolve a company
The dissolution process marks the legal end of a limited company.
This is usually a voluntary process that is initiated by the company director when they have chosen that the time is right. Once the process has been concluded, the company will be struck-off the Companies House Register.
However, the process can be involuntary and can be forced onto a company. This will usually occur where the company does not have a director in place or has failed to file annual returns or accounts.
Can any company be dissolved?
The short answer is no, a company must meet certain criteria in order to be dissolved.
Firstly, the company must not have had a change of name in the last 3 months. Secondly, it must not have sold any stock or traded in the last 3 months.
A company must be solvent in order to be dissolved. This means that it must not be faced with liquidation and must not have outstanding liabilities and debts that need to be dealt with.
Finally, the company must not have any ongoing insolvency measures in place such as a Company Voluntary Arrangement (CVA.)
A company that meets the outlined criteria is able to be dissolved. A company that has assets and liabilities that need to first be dealt with must close in a different way, however, which we will discuss more about later in this guide.
How should I prepare to strike off a company?
There are a number of things a company director must take care of before applying to have the company dissolved.
- Ensuring any outstanding taxes are paid, including National Insurance, PAYE and corporation tax
- Paying any employees their final wages
- Distributing any assets to shareholders
- Filing company accounts and tax returns with You must note that this is the final accounts due to dissolution
- Request that the company’s payroll scheme is closed and deregister for VAT if applicavle
- Close company bank accounts
- Notify interested parties and HMRC of the decision to dissolve the company
Why dissolve a company?
This is a good route for company directors that are looking to enter into retirement and do not wish to appoint a new director. This is also a good option for companies that have never traded, or for directors that no longer have a use for the company.
Using form DS01 to strike off a company
To dissolve a company, the director must complete and return form DS01. This form is available to download here.
This will need to be filled out and returned to Companies House.
To do this, you will simply need the company number, the company name, the director’s signature and the name, address and phone number of a contact for Companies House should they have any queries about the application.
Where you return form DS01 will depend on where the company was registered.
For English and Welsh registered companies the DS01 form must be returned to Companies House Cardiff. Forms for companies registered in Scotland should be returned to Companies House in Edinburgh. Whereas forms for companies registered in Northern Ireland must be returned to Companies House Belfast.
This form cannot currently be completed online, and must instead be posted to the correct address.
Once the DS01 form has been submitted, it will usually take around 3 months for the process to be completed and the company to be struck-off.
It costs just £10 to strike off a company. Which can be paid via cheque or postal order to Companies House. This should be sent alongside the completed DS01 form.
Once the DS01 form has been sent to Companies House, the director has 7 days in which to send a copy of the form to any interested parties. This includes company shareholders, creditors, any employees, any directors that did not sign the original form and any managers or trustees of a pension fund.
Is dissolution the same as liquidation?
As we mentioned earlier, this is an option available only to companies that do not have assets and liabilities that must be dealt with.
However, a company that does have outstanding debts and other liabilities will need to close through different means, namely liquidation.
What is liquidation?
Liquidation is a way to close a company that extracts its assets. Selling them in order to realise money that can be used to pay off any outstanding debts or redistributing money to the shareholders.
This is a formal insolvency procedure that must be carried out by a licensed Insolvency Practitioner. It is the more common way to close a company where the business has been recently trading.
These are both forms of voluntary liquidation, however there is a third type of liquidation that is not voluntary, namely compulsory liquidation.
Just as it sounds, this is when a company is forced into liquidation by the courts. This usually occurs when creditors are owed money by the company and therefore issue a winding-up petition to the court to get back what they are owed. Creditors will usually do this as a last resort if other means of gathering the payment have failed.
Let Clarke Bell help
Whether you are looking to dissolve your company in 2022, or you think liquidation would be the better way to close your company, Clarke Bell can help.
To see what we can do for you, why not get in touch with one of our friendly team members today.