The process involved with closing your company is about more than just closing the doors and walking away, irrespective of its size. There are many legal and logistical processes you’ll need to cater to in order to avoid the possibility of having to deal with any legal complications.
Whether it is a solvent or insolvent winding up of your business closing down, we walk you through a basic outline of the compliance matters you’ll need to take care of to get it right.
Selecting the best approach to closing your business
You essentially have two options through which to close your business. Solvent, if the company has the ability to pay its bills, and insolvent if it cannot.
In the event that the company is solvent, an application to have it struck off the Register of Companies can be filed. Alternatively the process of a members’ voluntary liquidation can commence.
If the business is not able to pay its bills when looking to close down, the interests of the creditors involved in the company will take legal priority over the shareholders. The creditors’ voluntary liquidation process will need to be used. As part of this process, 75% of the shareholders have to agree to a business liquidation auction, should the shareholders not come to an agreement.
Informing affected parties
Additionally to informing the HMRC of your plans to shut down, all the affected parties of the company need to be informed prior to your application for liquidation or to have the company struck off.
Selling remaining inventory and assets
If the business is going through an insolvent liquidation, professional advice from an independent insolvency specialist will need to be sought. Otherwise if it’s a solvent liquidation then you may be able to distribute some of the company’s assets to shareholders. All remaining assets and inventory will need to be sold, either way.
Settling outstanding debts
You’ll need to pay back any outstanding amounts of money owed to your creditors after informing them of your plans to close the business.
Paying employees and shutting down payroll
Prior to closing the business, all staff employed by the business will be entitled to their full, final pay, which might include holiday pay and the likes. The company will enter into insolvent liquidation in the event that it is unable to pay its staff in full.
Business documentation such as the likes of your bank statements, receipts and invoices will need to be kept for seven years following the company’s liquidation or striking-off. This is part of the process 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’ll likely need to make use of the services of insolvency specialists 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.