Closing down your company involves more than merely closing the doors and walking away, regardless of the size of the business. There are some legal and logistical processes you’ll need to cater to in order to avoid the possibility of having to deal with any legal complications.
Whether it’s an insolvent or solvent winding up through which your business is shutting down, we zone-in on the compliance matters you’ll need to take care of to get it right.
Selecting the best approach to closing your business
Basically you have two options through which your business can be closed down. Solvent – if the company has the ability to pay its bills, and insolvent if it is unable to.
A solvent company can file an application to have it struck off the Register of Companies, or alternatively the process of a members’ voluntary liquidation can begin.
Should the company not be able to pay its bills when seeking to close down, the interests of any creditors involved in the business will take legal priority over the shareholders, in which case the creditors’ voluntary liquidation process will need to be enforced. As part of this process, 75% of the shareholders will have to agree to liquidation, with the company put through compulsory liquidation should the shareholders not come to an agreement.
Informing affected parties
Alongside informing the HMRC of your plans to close down, all affected parties of the company need to be informed before you apply for liquidation or to have the company struck off.
Selling remaining inventory and assets
If the company is going through insolvent liquidation then advice from an independent insolvency specialist will be required, otherwise if it’s a solvent liquidation the company is going through, you would probably be able to distribute some of the company’s assets to shareholders. Either way, all remaining assets and inventory will need to be sold.
Settling outstanding debts
You will have to pay back any outstanding amounts of money owed your creditors after informing them of your plans to close the business.
Paying employees and shutting down payroll
Before the business ceases operations, all staff which is employed by the business will be entitled to their full, final pay, which may include holiday pay and the likes. The company will enter into insolvent liquidation if it is unable to pay its staff in full.
Business documentation including your bank statements, invoices and receipts should be kept for seven years after the company is liquidated or stuck off. This is party to the process of finalising all accounts, which includes filing an application for a Company Tax Return, settling all taxes and sending the final trading accounts to the HMRC (explicitly informing them of this fact).
You might need to consult with insolvency specialists if you want to make sure you do everything correctly with regards to closing down your business, a service which perhaps proves to be critical in the event that you’ve been served with a winding up petition as well.
I set this blog up a couple of years ago now as a way to share my experience that I’ve gained through my school education and my real life education. It sounds geeky, but the economy is something that I’m really passionate about and it’s something that I am actually pretty talented in, so it’s great for me to share these experiences with those that may be struggling a little bit with finance and figuring out how to navigate the economy.