Opening up a limited company is an easy process. Documents are submitted to Companies House and the company is a legal entity in its own right.
When it comes to closing a company though, there are a few pitfalls to watch out for.
Directors may want to close their companies for all sorts of reasons, it may be no longer financially viable, the directors may want to retire and there is nobody to take the company on or the directors simply want to get their cash out.
One way to close a limited company is by ‘strike off’, however, to qualify for this process the company must:
• Not have traded or changed names within 3 months
• Is not threatened with liquidation
• Has no agreements with creditors, such as a CVA
For a company to be struck off in this way, the directors must tell all interested parties, HMRC and employees. Assets must be disposed of properly and accounts brought up to date and closed off. Any assets remaining in a company which has been struck off will become property of the crown in the absence of any legal owner as will any monies held in a bank account, which must be closed on the day of dissolution.
Many directors are trying to use the striking off procedure as an alternative to placing their company into liquidation. Directors beware as the Insolvency Service have the powers to issue director disqualification proceedings against directors who strike off their companies. Creditors may also object to the strike off and take steps to wind up the company.