Company Dissolution in the UK

The need to liquidate a company in the UK can arise in a range of situations, whether due to the actual state of the business, financial considerations, or a change in the owners’ plans. UK law provides several legal routes for closing a company, and the right choice depends directly on the circumstances in question.

Main Ways to Close a Company in the UK

The key pieces of legislation governing the closure of UK companies are the Companies Act 2006 and the Insolvency Act 1986, as amended.

In general, the way you close a UK company depends on whether it can pay its debts. On this basis, you can distinguish between:

Solvent company	Insolvent company
voluntary strike off members’ voluntary liquidation (MVL)	creditors’ voluntary liquidation (CVL) compulsory liquidation, usually by court order

In addition, a company may be struck off compulsorily at the initiative of the Registrar (Companies House). This is not directly linked to the company’s financial position and is more commonly triggered by a breach of administrative requirements (see the section below for more detail).

In practice, where a company is solvent and has no administrative breaches, the voluntary strike off procedure is most often used as the simplest way to close the business. Below we outline the key features of this process.

Key Points of the Voluntary Strike Off Procedure

Restrictions on Using the Procedure

The voluntary strike off route is only available if certain conditions are met. In particular, a company cannot be struck off at the request of its members if, during the previous three months, it has:

• changed its name;
• traded or carried on any other business activity;
• disposed of assets that, immediately before the company ceased trading, were used for the purpose of generating income; or
• carried out any activity other than what is necessary to wind up the company’s affairs and comply with other legal requirements.

In addition, a company cannot apply for a voluntary strike off if certain formal procedures have been started against it, for example insolvency, administration, or liquidation proceedings.

Voluntary Strike Off Process

The strike off procedure typically involves the following main steps:

Stage	Details
Preparatory steps	At this stage, you must make sure there are no obstacles to proceeding with a strike off. In particular, you should: notify all relevant parties that may be affected by the company being struck off; settle any debts and other ongoing obligations of the company; close the company’s bank account; and dispose of the company’s assets and property. In addition, since financial and tax reporting in the UK is mandatory, the company must meet the relevant compliance obligations before it ceases to exist. It is important to remember that mistakes at the preparatory stage can lead to adverse consequences for the owners, for example: if the company has outstanding debts, creditors may object and the strike off will be suspended; and if the company still has undistributed assets at the time it is struck off, those assets may pass to the Crown (bona vacantia).
Submitting the application	The application for a voluntary strike off must be signed by a director or by a majority of the directors.
Notifying interested parties	Within seven days after filing the application, you must notify the following parties: the company’s members; employees; the manager or trustee of any pension scheme set up for the company’s employees; creditors; and any directors who did not sign the application.
Publication in the Gazette	After receiving the application, the Registrar publishes a notice in the official Gazette (the Gazette) so that interested parties can object to the company being struck off.
Strike off	If no objections are received, the company is struck off the register no earlier than two months after the notice is published.

Objections to a Voluntary Strike Off

An objection may be submitted by a shareholder or another person who can show a legitimate interest in the company continuing to exist. By way of example, objections may be raised where:

• the relevant parties were not informed about the proposed strike off;
• the company has outstanding debts to the objecting party;
• the objecting party has grounds to bring a legal claim against the company; or
• the company included false information in its application, for example where it in fact traded or carried on business during the three months before the application was filed.

Compulsory Strike Off by the Registrar

Where the Registrar has reasonable grounds to believe that a company is not carrying on business, the Registrar may start a compulsory strike off procedure. To do so, the Registrar:

• sends the company an enquiry asking whether it is carrying on business;
• if no reply is received within 14 days, issues a further notice;
• if the company confirms that it is not carrying on business, or if no reply is received within the prescribed time, publishes a notice in the official Gazette stating that the company will be struck off after two months; and
• after this period, if no valid objection is received, strikes the company off the register and publishes a further notice in the Gazette.

From that moment, the company is treated as having ceased to exist and is dissolved.

It is important to note that a strike off initiated by the Registrar does not release the company’s directors, officers, or members from liability. In other words, their obligations and potential liability remain as if the company had continued to exist, and claims may still be brought against them, including through the courts.

Another key feature of this procedure is that the company may be restored to the register. An application for restoration may be submitted only by a former director or member within six years from the date the company was struck off.

Restoration is possible subject to certain conditions. In particular, the company must settle all penalties imposed for breaches of corporate compliance requirements.

Members’ Voluntary Liquidation of an English Company

A solvent company may be liquidated at the initiative of its members. The main difference from a voluntary strike off is that the company may remain active until the liquidation resolution is passed and may still have outstanding obligations. In addition, this procedure requires the appointment of a liquidator.

In general, a members’ voluntary liquidation is carried out as follows:

Stage	Actions
Making a declaration of solvency	The directors (or a majority of them) must make the declaration of solvency within the five weeks immediately before the winding-up resolution is passed, or on the date the resolution is passed. The declaration sets out the company’s assets and liabilities and states the period within which the company will pay its debts in full. This period must not exceed 12 months from the start of the liquidation.
Passing the winding-up resolution	The members pass a resolution to wind up the company. From this point, the liquidation is treated as having started and the company’s business is brought to an end.
Appointing a liquidator	At a general meeting, the members appoint a liquidator to wind up the company’s affairs and distribute its assets. All directors’ powers pass to the liquidator.
Preparing the final liquidation account	After the company’s affairs have been wound up and its assets distributed, the liquidator prepares a final account and provides it to the members within the required timeframe. The liquidator then files the final account with the Registrar.
Completion of the liquidation	Once the Registrar receives the final account, the company is dissolved and its status changes to “dissolved”.

A creditors’ voluntary liquidation differs from the procedure described above in the following ways:

• the company cannot pay its debts;
• control over the liquidation shifts from the members to the creditors; for example, the creditors appoint the liquidator; and
• the procedure is carried out out of court.

Compulsory Liquidation by Court Order

Grounds for the compulsory liquidation of a private English company by court order may include:

• the members passing a special resolution for the company to be wound up by the court;
• the company not carrying on business for one year from incorporation;
• the company being insolvent; or
• other circumstances where the court considers liquidation to be fair and justified in light of the specific facts and the interests of the company’s members and third parties.

A company is treated as insolvent if one of the following applies:

• the company fails to comply with a creditor’s written demand for payment of a debt exceeding GBP 750 within three weeks of receiving it;
• the value of the company’s assets is lower than its liabilities; or
• the court concludes that the company is unable to pay its debts as they fall due.

An application for compulsory liquidation may be filed by the company’s members, directors, or creditors.

Our UK Company Liquidation Services

Uniwide’s specialists can support you at every stage of closing a company in the UK, including:

• assessing the company’s position and the factors that affect the choice of closure route;
• providing end-to-end support with a voluntary strike off (strike off);
• assessing the suitability and implications of the available closure procedures;
• helping you appoint a liquidator; and
• preparing final liquidation accounts and other corporate documents.