Closing a limited company
There are three ways to close a limited company, and the right one depends on whether the company is solvent, insolvent, or already facing a creditor in court. Start with the route that sounds like yours, or call us and we will tell you which applies.
What does closing a limited company involve?
Closing a limited company means formally ending it through a liquidation, where a licensed insolvency practitioner realises the company assets, deals with creditors or shareholders under the Insolvency Act 1986, and has the company struck off the register at Companies House.
Which liquidation you need turns on one question: can the company pay its debts? A solvent company uses a members’ voluntary liquidation to release its reserves, an insolvent company is closed through a creditors’ voluntary liquidation, and a company that a creditor has taken to court faces compulsory liquidation.
What are the ways to close a limited company?
There are three formal routes to close a limited company, each fitting a different position: two are for companies in debt and one is for a solvent company being wound up. Read the full guide to whichever matches your situation.
Creditors' voluntary liquidation (CVL)
For an insolvent company the directors decide to close
A creditors' voluntary liquidation closes an insolvent company that can no longer pay its debts, with the directors choosing to stop trading and appointing a liquidator to realise the assets for creditors before anyone forces the issue.
Read our full guide to creditors' voluntary liquidationCompulsory liquidation
For a company facing a winding-up petition
Compulsory liquidation is the court-ordered closure of a company, forced by a creditor through a winding-up petition. If you have received a petition, acting before the hearing is what keeps your options open.
Read our full guide to compulsory liquidation and winding-up petitionsMembers' voluntary liquidation (MVL)
For a solvent company the shareholders want to close
A members' voluntary liquidation is the tax-efficient way to close a solvent company, using a liquidator to distribute the reserves to shareholders as a capital payment once the company has finished its work.
Read our full guide to members' voluntary liquidationWhich company closure route is right for your company?
The right closure route depends on whether the company is solvent or insolvent and whether a creditor has already acted, and the table below sets out where each of the three liquidations fits so you can see which matches your position.
| Your situation | The right route | What happens |
|---|---|---|
| The company cannot pay its debts and has no viable future | Creditors’ voluntary liquidation | The directors close the company and a liquidator realises the assets for creditors |
| A creditor has presented a winding-up petition | Compulsory liquidation | The court can order the company wound up, so acting before the hearing matters |
| The company is solvent and its work is done | Members’ voluntary liquidation | A liquidator distributes the reserves to shareholders as a capital payment |
Not sure which applies to your company? Call us on 01625 540 744 and we will tell you honestly.
Is closing the company the only option?
Closing a company is not the only answer to company debt, because a business that is viable once its historic debt is dealt with can often be saved rather than liquidated. Before you decide to close, it is worth knowing whether a rescue procedure could keep the company trading.
See all the ways to rescue a viable company, or call us and we will tell you honestly whether yours can be saved.
Speak to a practitioner
01625 540 744The first conversation is free, confidential and without obligation. You will speak to James Kaye or Nick Morgan directly, from your first call.
Frequently asked questions
How do I know which way to close my company?
The first question is whether the company is solvent or insolvent. A solvent company being closed to release its reserves uses a members' voluntary liquidation, while an insolvent company that cannot pay its debts is closed through a creditors' voluntary liquidation. If a creditor has already petitioned the court, the situation is compulsory liquidation and time matters. We will tell you which applies to yours.
Is liquidation the same as closing a company?
Liquidation is the formal way to close a company through a licensed insolvency practitioner, but it is not the only way. A company with no debts and very low reserves can sometimes be struck off using form DS01 instead. Where a company has creditors, liquidation is the proper and safe route because a strike-off can be objected to and reversed.
Does my company have to close, or could it be rescued?
Whether a company should close or be rescued depends on whether the underlying business is viable once its historic debt is dealt with. A viable business can often be saved through administration or a company voluntary arrangement, while a company with no realistic future is usually closed through a creditors' voluntary liquidation. We look at both before you decide.
Talk to a licensed insolvency practitioner today
The call is free and confidential, with no obligation. We will explain your options in plain English and tell you where you stand.
the Institute of Chartered Accountants in England and Wales (ICAEW) · Serving the whole of the UK · NTF group since 2009