Closing a Limited Company: A Guide

StrategyDriven Entrepreneurship Article |Closing a Limited Company|Closing a Limited Company: A Guide Making the choice to close a business is never a simple or easy process, but that process is made much, much harder if you do not know what is coming your way. There is more than one way to close a limited company as it depends on whether the company can settle its debts within a reasonable timeframe. If the company can repay its creditors, there are two options: company dissolution or solvent liquidation.

However, if a company is not able to repay its debts and/or has liabilities that are greater than assets, this is known as an insolvent company. These companies must close either by a compulsory or voluntary liquidation. Liquidation is the selling of the company’s assets so that the proceeds can be used either to repay creditors or shared among shareholders.

This guide aims to outline the options available when closing a limited company.

Closing an insolvent limited company

Creditors’ Voluntary Liquidation (CVL)

An insolvent company is an option for companies that are in a lot of debt, which they will struggle to repay. They may also be concerned that creditors may sue them if they do not declare insolvency. Companies that are insolvent but do not prioritize repaying their creditors could find themselves under scrutiny from the Insolvency Service. A CVL can not only prevent these issues but can also enable directors to claim redundancy. A redundancy pay-out could go towards repaying some creditors or paying other professionals involved in the insolvency process.

If you think that your company is insolvent, you need to stop trading immediately so you can protect your creditors. Your shareholders need to vote in favor of a winding-up resolution (with at least 75% in favor).

The next stage is to put together a repayment proposal outlining how you intend to repay creditors. If the creditors vote to accept it, they can appoint an insolvency practitioner. The practitioner will take control of the sale of the company’s assets so that the proceeds can be used to pay creditors.

It is always best to seek professional advice when it comes to business finances and legalities to ensure you acting lawfully and in the best interests of your shareholders, creditors, and employees. If you would like further information about a Creditors’ Voluntary Liquidation, visit

Compulsory liquidation

The other form of company liquidation is compulsory, i.e., enforced closure. Compulsory liquidation can be initiated by the company, a director, or by creditors. A creditor can petition the court for a company’s winding up if they are owed £750 or more. A winding-up petition needs to be submitted to the court to kick the process off. In some cases, directors of the company may be investigated to ensure that there was no fraudulent activity or misconduct, which led to insolvency.

Closing a limited solvent company

Members’ Voluntary Liquidation (MVL)

Members’ Voluntary Liquidation is an option when a company has naturally come to the end of its life, or when the owner or director of the business wishes to move on or retire, and there is no one else to continue running the business.

To start the MVL process, a Declaration of Solvency needs to be signed. This confirms that the company is financially solvent before it closes. When this has been done, the shareholders need to vote and pass the resolution, assuming at least 75% are in support of it.
At this point, a licensed insolvency practitioner (IP) needs to be appointed to manage the process. This could include the sale of company assets, paying creditors, and distributing any remaining funds amongst shareholders.

Company dissolution

Another option is to dissolve a company, but it must be a solvent company. It is a lower-cost option involving removing the company from the Companies House register. Before applying for company dissolution, several steps need to be taken.

The company needs to cease trading 3 months before it is removed from Companies House, close the payroll, repay all creditors and ensure all statutory liabilities have been met, such as National Insurance and tax.

The creditors also need to be informed that the company will be dissolving. This is an important step, as if not done correctly, a creditor could apply to have the company reinstated at a later date.

When these steps have been taken, a DS01 form needs to be sent to Companies House with an £8 fee. This can be done by post or online.

A notice should be placed in your local newspaper announcing that the company will be closing, with a formal confirmation of the closure three months after that.

How Start-Ups Stay Up – How I Run My Small Business

StrategyDriven Managing Your Business Article |Start-Ups |How Start-Ups Stay Up - How I Run My Small BusinessI am a bankruptcy attorney in Philadelphia. I started my law firm over 20 years ago and have helped thousands of clients get a fresh financial start over the years. I have four tips for small business owners both new and experienced. I credit these basic principles with the success of my firm.

Create Your Niche

You might be the greatest widget-maker on the planet, but if the market for widgets is saturated that will not matter – it will be a struggle, up-hill, to get noticed by potential customers. Make sure that when you start your business you have identified a service or product that is fresh to the market, whether that market is local (like a bankruptcy law firm, or a house painter) or global (products that can be exported or services that can be done remotely).

Advertise Your High-Quality Service or Product Online.

The days when a website is just an online business card are long over. An effective website will clearly show what you do or are offering and be findable by people who need you. The structure and content of the site itself should attract the viewer to stay on the site, and eventually start on their Buyer’s Journey to purchasing your service or product.

Any commercial website these days absolutely must be optimized for mobile devices. Potential customers most frequently use their smartphones or their tablets to google solutions to their problems, and they will click away from an unwieldy site that is difficult to read or navigate.

The content of your site should establish your expertise and/or relevance to the viewer’s search, and a clear and easy way to contact you or to purchase your service or product.

Maintaining a blog is a great way to inform current clients and future clients of the latest developments in your field, of new products or services you are offering, and to establish your expertise or your product’s high quality.

Convert Satisfied Clients and Customers into New Clients.

The first order of business is to make sure you are providing current customers and clients with a high-quality product or service. What you offer should do what you promise it to do and if a problem arises, a customer must be able to contact you for a remedy. Good customer service is the primary driver of repeat and referred business. So many clients are referred to me by their friends or family who used my services. That is gratifying.

But how to harness the power of satisfied clients’ goodwill? Provide them with the opportunity to leave you a positive review. I’m not suggesting you email each client or customer yourself, but rather, that you purchase one of the many available systems that automate this process for you. It’s a nominal expense for what you get in return.

Once you have clients’ email addresses, you can create a mailing list to inform list subscribers of sales or specials or a change in operating hours, etc. Make sure to ask clients first before you add them to your mailing list, and in each email sent, offer a simple way to unsubscribe. There are many good list managing companies online who will organize this for you.

Create a Network of Professionals and Peers

Word-of-mouth is valuable not just among former clients and future clients, but between professionals and your peers as well. Here are some ideas about how you can start and grow your network:

  • Join your national professional associations and attend conferences
  • Join your state or local professional associations and attend meetings
  • Join your local rotary club or other organization to network with local businesses unrelated to your business
  • Once established in your field, offer to give talks at meetings and conferences, to establish your expertise
  • Invite members of your network to subscribe to your blog or email list, for the latest news, and join theirs
  • Be active in your community. Volunteer your time or funds to support any quality-of-life events in your city or town, like a July 4th Town Picnic, or a Thanksgiving 5K. You can’t put a price on the goodwill that will generate for you and your business.

About the Author

StrategyDriven Expert Contributor | David M. Offen, Esq.Mr. David M. Offen, Esq. is a bankruptcy and foreclosure attorney in Philadelphia who attended Temple University College and Law School. Mr. Offen is licensed to practice in the States of Pennsylvania and New Jersey. He is a member of the Eastern District of Pennsylvania Bankruptcy Conference and the National Association of Consumer Bankruptcy Attorneys and maintains an active blog on all aspects of bankruptcy filing and current events.

How to Avoid a Business Bankruptcy

StrategyDriven Entrepreneurship ArticleThe number of small businesses filing for bankruptcy increases every year, and while bankruptcies don’t always lead to the full closure of the company, in a lot of cases they do. If your dream business is currently on the verge of bankruptcy, don’t panic. There are some steps you can take that may help you to turn things around. Try to think as positively as you can and put the following steps into action.

1. Look at the Figures

The first thing you need to do is work out how much you need to make each month to survive. This includes both the money you need to actually live, and the money you need to repay your creditors. Add 20% to this figure to give yourself a cushion. Finally, add in the costs of running your business. This includes everything from your bills to your payroll to the cost of inventory. With this information at hand, you need to work out how much your business is earning each month. If you are facing bankruptcy, it’s likely you have a deficit between the two numbers. The next steps are going to focus on decreasing costs and increasing profit to give you enough to cover everything you need to pay.

2. Cut Costs

Okay this sounds simple, but there is sure to be some ways that you can lower your expenses to meet your spending goals. Consider getting rid of your traditional phone plan and switching to VoIP, look into cheaper packaging options, and look into obtaining new quotes for any services you receive that aren’t under contract. The aim here is to look for redundant costs that your business can do without and either eliminate them entirely or reduce the amount you are spending.

3. Renegotiate with Your Creditors

Phone your creditors and let them know you are considering bankruptcy. The majority will be happy to come up with a payment plan that works for you so long as it means they will still receive what they are owed (with bankruptcy there is no guarantee they will be paid). Some may be willing to waive the interest, while others will extend the terms of your debt so that you have longer to repay it. You could also file a consumer proposal with your creditors if you don’t want to speak to them directly.

4. Look at Short Term Cashflow Options

We’re not necessarily suggesting that you take out loans to cover your cash flow. Instead, speak to your vendors and ask them for more lenient payment terms. If they can extend their terms, you will free up more cash in the short term. Another option is to ask your clients to pay you quicker. You could offer them a small percentage off their invoice if they are willing to pay faster. Both of these options will provide a boost in the short term.

Sometimes filing for bankruptcy is the only option. However, it is worth giving the above a try first if it could mean saving your business.