The decision you make to close down your company will involve more than just simply walking away after closing the doors, irrespective of the size. Some legal and logistical processes will need to be catered to so as to avoid the possibility of having to deal with any legal complications.
Whether it will be a solvent or insolvent winding up through which your business is closing, we run through a basic outline of compliance matters you’ll need to take care of to get it right.
Selecting the best approach to closing your business
You basically have two options through which to go ahead with the closing down of your business. Solvent, if the company has the ability to pay its bills, and insolvent if it can’t.
If the company is solvent, an application to have it struck off the Register of Companies can be made, or alternatively the process of a members’ voluntary liquidation can commence.
In the case of the company being insolvent and is not 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 used. 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
All affected parties need to be informed before you apply for liquidation (or to have the company struck off), in addition to informing the HMRC of your plans to close the company down.
Selling remaining inventory and assets
Advice from independent insolvency specialists will do you good if the company is going through an insolvent liquidation, otherwise you might be able to distribute some of the company’s assets to shareholders if it’s a solvent liquidation. Either way, all remaining assets and inventory will need to be sold.
Settling outstanding debts
Any outstanding amounts of money you owe your creditors will need to be paid back to them after informing them of your plans to close the business.
Paying employees and shutting down payroll
All staff which is employed by the business will be entitled to their full, final pay, which may include holiday pay and the likes, prior to the business closing. If it is unable to pay its staff in full the company will enter into insolvent liquidation.
Your bank statements, receipts and invoices will need to be kept for seven years following the company’s liquidation or striking-off as part of the required business documentation to be kept on record. This forms part of finalising all accounts, which includes applying 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 find that you need to make use of the services of an insolvency specialist 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.