A guide, not advice. This explains how things generally work. A licensed insolvency practitioner will tell you what applies to your company or to you.
How do I close a limited company?
There are four main routes for closing a limited company - strike off, Members' Voluntary Liquidation, Creditors' Voluntary Liquidation, and administration - and the right one depends on whether the company can pay its debts and how much it holds.
In this guide you'll learn how each route works, what each costs, and how to choose between them, whether your company is thriving, dormant, or in difficulty.
Closing a company has tax, legal, and personal consequences for directors, so it's a good idea to take advice before starting any formal process.
The first question: is the company solvent?
Everything follows from one test - can the company pay all of its debts in full, including the costs of closing?
If yes, the company is solvent and your choice is between strike off and an MVL.
If no, the company is insolvent, and the responsible routes are a CVL or - where a viable business could be rescued or sold - administration.
Directors of an insolvent company should not attempt strike off as a shortcut: creditors (including HMRC) can and do object, and dissolving a company with unpaid debts can lead to the company being restored, and to personal consequences for directors.
Route 1: Strike off (dissolution) - for solvent companies with small balances
Strike off is the simplest and cheapest route: the directors apply to Companies House on form DS01, and if no one objects, the company is dissolved around two to three months later.
It suits dormant companies and those with little left in them.
The tax catch: distributions to shareholders on strike off above £25,000 are taxed as income, not capital - which is precisely the point at which an MVL usually becomes worthwhile.
Before applying, the company must have ceased trading for three months, and directors must notify creditors, employees, and HMRC.
Route 2: Members' Voluntary Liquidation - for solvent companies with meaningful funds
An MVL is the formal, tax-efficient closure for a solvent company - typically worthwhile once retained funds exceed roughly £25,000.
Distributions are treated as capital, and qualifying shareholders may benefit from Business Asset Disposal Relief, often producing substantial tax savings compared with dividends or strike off.
It requires a licensed insolvency practitioner, and directors must swear a Declaration of Solvency confirming all debts can be paid.
Route 3: Creditors' Voluntary Liquidation - for insolvent companies
A CVL is the standard responsible route for closing a company that can't pay its debts.
Directors and shareholders start the process, a licensed insolvency practitioner is appointed as liquidator, assets are realised for creditors, employees can claim redundancy through the government scheme, and the company is dissolved.
Acting voluntarily, before creditors force compulsory liquidation, keeps directors in control of the timing and reflects well on their conduct.
Route 4: Administration - when the business is worth saving
If the company is insolvent but the business inside it has value, administration may rescue it or sell it as a going concern - a fundamentally different outcome from closure, even though the original company often ends up dissolved afterwards.
Administration costs more than liquidation and only makes sense where there is genuinely something to save.
Which route is right for my company?
As a quick orientation:
A dormant company with almost nothing in it - strike off.
A solvent company with more than about £25,000 retained - an MVL, for the capital tax treatment.
An insolvent company with no viable future - a CVL, started sooner rather than later.
An insolvent company with a business worth saving - take urgent advice on administration.
The boundaries have nuances - contingent liabilities, personal guarantees, ongoing disputes, and tax anti-avoidance rules can all change the answer - which is why an initial conversation with a licensed insolvency practitioner is worthwhile whichever route looks likely.
What does closing a company cost?
Strike off costs almost nothing in fees; an MVL is typically a modest fixed fee that the tax saving usually dwarfs; a CVL commonly starts from a few thousand pounds; administration costs more, reflecting the work involved.
Our guides on the cost of liquidation and insolvency practitioner fees break these down.
Where can I get advice on closing my company?
Speak to a licensed insolvency practitioner in Manchester today on 0333 023 5090. Our ICAEW-licensed IPs advise on every closure route across Greater Manchester - one conversation will usually establish the right one for you.
InsolvencySupport.co.uk is operated by Xeinadin Corporate Recovery Limited (company no. 11415156), 100 Barbirolli Square, Manchester M2 3BD. Our insolvency practitioners are licensed and regulated by the ICAEW.
This article is intended for general information purposes only and does not constitute financial, legal, tax, or professional advice. Tax treatment depends on individual circumstances - always take advice from a licensed insolvency practitioner and a qualified tax adviser before acting.