Shutting a Limited company
If a Limited company owes money, the creditor has obtained a judgment and you don’t pay then that creditor can appoint a liquidator and put your company into receivership in order to try and recover their debt. This is an expensive exercise for the company owed money and therefore the amount due would normally have to be significant.
If you have a few creditors and the reasons for the company ceasing to trade are fairly straightforward, then it is entirely possible for you to shut down the company yourself, you don’t need a liquidator.
There are two reason to shut a company
1) You don’t owe anybody, the company is solvent but you simply don’t want the company anymore.
2) You have some creditors you can’t pay and the business is insolvent.
The process for 1) is very very straightforward. You file a striking off form at Companies House and pay a £13 fee. They then post an advert in the Gazette advertising the fact the company has applied to be dissolved and assuming there are no objections to the striking off (which there won’t be as you don’t owe any money), then after a few months the company ceases to exist and that’s that.
Under scenario 2) it’s the same process as for 1) but you should write to all your creditors and explain the company is being struck off. They can then write to Companies House to object and if they accept that objection, then they will pause the striking off for a period of 6 months to allow time for the dispute to be resolved. If an objection just relates to money you owe them, then after 6 months Companies House are unlikely to extend the objection period simply because the company can’t pay. The limited liability protection will therefore kick in and the company will be struck off with you personally not responsible for any of the debt.
Under scenario 2) there are some things to consider. You can’t just take the Goodwill of the business and start a new company leaving the debts behind. If the Goodwill has a value you should buy it from the old company. For example, you are a hairdresser with a client list and you apply to strike off your company still owing some creditors. That client list isn’t your asset personally it’s an asset of the company and if you want to use it in a new company then a payment should be made to acquire it
Finally, with regards HMRC they often don’t object because you owe money it’s the absence of being up to date with things like the corporation tax return which they will object to. Therefore, you need to make sure when you file a striking off form that you are fully up to date with your year end accounts.