How to Close a Non-Trading Limited Company
The easiest method to close a non-trading limited company is by dissolving it, also known as “striking off” the company from the Companies House register. This option is straightforward, but there are steps and nuances you need to consider before you file the necessary paperwork. In this article, we’ll dive into what you need to know, and how to go about the process efficiently.
Why Close a Non-Trading Company?
When your company is non-trading or dormant, you might wonder why it even needs to be closed. The answer is simple: liability and compliance. Even if you’re not generating revenue, the company still exists as a legal entity, and the directors remain liable for its compliance obligations. This includes filing annual accounts and confirming statements. Failure to do so can lead to fines or even forced liquidation by the government.
Additionally, maintaining a non-trading company can tie up your resources, both in terms of time and money. Even dormant companies have basic costs, such as a registered office address and professional fees for keeping records in line with statutory requirements. If you have no intention of using the company again, closing it down is often the most efficient way forward.
Pre-Closing Checklist
Before initiating the closure of your company, it’s essential to go through a checklist to ensure the process goes smoothly:
Settling Debts and Obligations: Make sure all outstanding debts and liabilities are settled before you start the process of closing the company. If the company owes any money, it cannot be struck off the register.
Pay Final Taxes: Ensure any final corporation tax liabilities, VAT returns, and PAYE are submitted and cleared. HMRC must be notified that you intend to close the company. You’ll need to complete final accounts and a company tax return.
Transfer Assets: Any remaining assets in the company need to be distributed to shareholders or transferred to another business. Leaving assets behind can complicate the process and potentially lead to tax implications.
Notify Employees: If your non-trading company has employees, even if they’re not currently working, you must formally terminate their contracts and ensure they receive any outstanding wages or redundancy pay.
How to Strike Off a Non-Trading Company
Once you’ve completed the pre-closing tasks, you can proceed with dissolving the company. The formal process of striking off a limited company involves applying to the Companies House using a DS01 form. Here’s a step-by-step breakdown of how to do it:
Complete the DS01 Form: You can download this form from the Companies House website. It must be signed by the majority of the directors if the company has more than one.
Submit the Form: After the form is signed, submit it to the Companies House along with a small fee (usually around £10).
Advertise the Closure: Companies House will publish your application for striking off in The Gazette, the UK’s official public record. This provides creditors and any interested parties with an opportunity to object to the dissolution if they have a valid reason.
Wait for Confirmation: If no objections are raised within two months, your company will be struck off the register. At this point, it ceases to legally exist, and you’re no longer required to file accounts or other statutory documents.
What Happens If There’s an Objection?
An objection from creditors, employees, or any other interested party can stop the dissolution process in its tracks. The most common reasons for an objection include unpaid debts, unresolved legal disputes, or ongoing business activities.
If an objection is lodged, the company must address the concern before reapplying for dissolution. This could involve paying off the debt or resolving a legal matter. Once the issue is cleared, you can restart the strike-off process.
Other Options for Closing a Non-Trading Company
If your company has significant assets or debts, dissolution might not be the best route. In these cases, consider one of the following options:
Voluntary Liquidation: If the company has debts that can’t be paid off before dissolution, voluntary liquidation might be a better solution. In this process, a liquidator is appointed to sell the company’s assets, settle its liabilities, and distribute any remaining funds to shareholders.
Members’ Voluntary Liquidation (MVL): If your non-trading company has assets worth more than £25,000, you might choose an MVL. This is a formal process where the company’s assets are distributed to shareholders in a tax-efficient way. The key benefit of this process is that it allows directors to release capital as a capital gain rather than a dividend, potentially resulting in lower tax liabilities.
Key Mistakes to Avoid
Forgetting to Notify HMRC: Not informing HMRC that you’re closing the company can lead to fines, penalties, or ongoing tax liabilities. Ensure that you submit final accounts and settle any tax obligations.
Leaving Assets in the Company: Any assets left in the company at the time of striking off become the property of the Crown. This is a common mistake that can be costly if you forget to distribute company assets before applying for dissolution.
Not Paying Off Debts: If the company has outstanding debts, your dissolution application will be rejected, and creditors can pursue legal action against the company’s directors. Settle all financial obligations first to ensure a smooth closure.
Failing to File Final Accounts: Even if the company is non-trading, failing to submit a final set of accounts and tax returns can cause complications with both Companies House and HMRC. Ensure all filings are up to date before proceeding with the strike-off.
Post-Closure Considerations
Once your company is officially closed, you’ll want to ensure you handle any final loose ends:
Keep Records: Even after the company is dissolved, it’s essential to keep financial and statutory records for at least six years. HMRC may require these for future inquiries or audits.
Notify Stakeholders: Inform any remaining stakeholders, including customers, suppliers, or banks, that the company has been closed. This helps to avoid confusion or complications in the future.
Personal Liabilities: If you were a director of the company, it’s important to understand that closing the company doesn’t absolve you of any personal liabilities that may arise in the future.
Closing a non-trading limited company is a straightforward process, but it’s one that requires careful attention to detail. Failure to follow the steps correctly can lead to delays, fines, and even legal consequences. By following this guide, you can ensure that the process is handled smoothly and efficiently, allowing you to move on to new ventures with peace of mind.
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