As a rule, to close your limited company you would need the agreement of all the company directors and any shareholders.
The method to use depends on whether the company is solvent or not.
Company is Solvent (able to pay its bills)
A company that can pay its bills is ‘solvent’ which means you can either:
- Liquidate a company that you no longer want to run.
- Strike off your limited company from the Companies Register.
Note: As a rule, striking off the company from the register is the cheapest way to close down a limited company in United Kingdom.
Company is Insolvent (unable to pay its bills)
The company would be ‘insolvent’ if it cannot pay its bills. In this case, the legal interests of any creditors (people the company owes money to) would have priority over the directors or any shareholders.
Being insolvent would mean you have to use the creditors’ voluntary liquidation (CVL) process to close a limited company. Even so, applying to make Company Voluntary Arrangements could mean you avoid liquidation.
Note: There are strict laws for dealing with a limited company’s debts in the United Kingdom. Creditors can force a company to be ‘wound up’ if it cannot pay its bills
Closing a Limited Company without a Director
You would need to make changes to your private limited company if there is no director. There are set procedures for appointing a new director (e.g. if the sole director passed away).
Note: In due course, Companies House would eventually strike off a company with no director. But, waiting for this process to take place can make it difficult to manage company assets.
If there are shareholders, they would need to be in agreement to appoint a new director. In most cases, they vote on the appointment using a process called ‘passing a resolution’.
What if the sole director dies and there are no shareholders? In this case, the executor of the estate would have the power to appoint a new director. But, it can only occur if the company ‘constitution and articles of association’ allow it.
The appointment of a new director means they would be able to close down a limited company if they choose to.
Letting a Limited Company become Dormant
In fact, closing a limited company is not a legal requirement – providing it stops trading. It means you could keep your company registered with Companies House.
But, you would only be able to put it into inactive status (dormant for taxation purposes) if you are not:
- Conducting any business activities
- Receiving income
- Trading (buying and selling)
Note: There are no time limits on how long you can keep a limited company dormant. You can keep it that way for as long as you want to. But, you must still send your annual accounts and confirmation statement (previously annual return) to Companies House.