Talk to us today in confidence0800 970053907833 240747

How To Wind Up A Limited Company

Written by Keith Steven Managing Director 21 April 2021

How To Wind Up A Limited Company

How to wind up a limited company, as well as the attached rules and regulations, differ, depending on whether your company is solvent or not.

It is important to know that for all winding up procedures, shareholders must attend a meeting, where they vote and 75% of shareholders must agree, for a winding up resolution to be accepted. Then,

  1. Insolvency practitioners are appointed,
  2. The resolution must be sent to companies house within 15 days
  3. The Gazette must advertise the resolution within 14 days.

Winding Up A Solvent Company

If the company can pay all debts owed to creditors before closure, the procedure of winding up is simpler. You have two options:

  1. Company Dissolution: When the company has ceased trading for 3 months, you can fill in a ‘DS01 Striking off application’. This then goes through to Companies’ House, who, if agreed, will close the company and remove it from the register.
  2. Members Voluntary Liquidation (MVL): This is usually the option taken when directors wish to retire or just simply end a business’ life. A declaration of solvency should be made. A licenced insolvency practitioner is called in to turn the company’s assets into cash and then distribute the profits from this to members. For more information on an MVL, see here

Winding Up An Insolvent Company

If a company cannot pay its debts, then the company may need to be wound up. There are two options:

Compulsory Liquidation:

Creditor action forces closure following the issue of a winding up order if the company cannot respond to the demand by paying the debt off or negotiating. Additionally, directors can apply to the court for this. You must be able to prove that the company cannot pay its debts of over £750 and show the shareholders’ approval.  An official receiver is appointed for distributing the company’s assets for cash, to help pay off the debts. The creditors have priority here over any members’ dividends. 

Creditors Voluntary Liquidation:

Creditors will vote on the decision to wind up a company. If 75% agree, then the winding up will begin. A licensed insolvency practitioner will be employed to help and ensure the correct distribution of the liquidated assets. This is usually done to avoid further debts of the company and reduce the risk of personal liability.

After the winding up process, the company ceases trading and no longer employs people. After being removed from the Companies’ House register, the company is no longer in existence.

What if I am threatened with a winding up petition?

If you are sent a winding up petition, you must act immediately. If you do not, the petition may be advertised which can result with your bank account being frozen. This brings consequences for the continued operation of the business.

What if I am chasing a debt and wish to wind up the limited company?

If this is the case, you must be very careful. Issuing a winding up petition should be a last resort. You must have the debt proven and not in dispute. Additionally, there are large costs attached to issuing a petition (up to £3000!), so therefore it is best saved for large debts.

Note that due to the Covid-19 pandemic you cannot issue a winding up petition to a company that has been affected by lockdowns until 30th September 2021

In essence, if you are considering any action to wind up a company then you must take advice, preferably from an insolvency practitioner. We are licensed insolvency practitioners and you can call us on 08009700539

Categories: Liquidation, Complete Guide to Creditors Voluntary Liquidation CVL

A Worried Director

The Ultimate Guide For Worried Directors

Worried about poor cashflow? Covid-19?, How to pay wages on pay day? For expert advice on a range of issues download our free Ultimate Guide For Worried Directors today. Or just call us on 0800 9700539

Please note that the guide includes updates due to Covid-19 For instance there have been some changes to insolvency legislation that limits creditors actions and relaxes rules regarding wrongful trading.  A new 20 day moratorium for distressed businesses has also been introduced. 

"KSA Group which owns this site, will help you fix problems in your business. We won't charge for any initial advice or face to face meetings. We speak in English. We will save you money and your precious time.  You can come to any of our offices

"We also follow up any meeting with a full "solutions report" which runs on average to 30 pages valuable free advice!!  No other practitioner offers this service.  In this report we advise on ALL the options and explain them clearly.  We advise on a course of action given the information you have given us ( the more information we have the better we can advise!)"

You are currently offline. Some pages or content may fail to load.