How to dissolve your limited company from £10.00
If your limited company is no longer required, for example if the company was set up for a specific project which has now finished, you can apply to have it struck off from the register at Companies House.
This brief guide relates to striking off formerly trading companies which have now stopped trading and are no longer required. It does not refer to a formal insolvency process.
To quote Companies House …
“A private company can apply to be struck off if, in the previous three months, it has not:
- traded or otherwise carried on business;
- changed its name;
- for value, disposed of property or rights that, immediately before it ceased to be in business or trade, it held for disposal or gain in the normal course of its business or trade (for example, a company in business to sell apples could not continue selling apples during that three-month period but it could sell the truck it once used to deliver the apples or the warehouse where they were stored);
- engaged in any other activity except one necessary or expedient for making a striking-off application, settling the company’s affairs or meeting a statutory requirement (for example, a company may seek professional advice on the application, pay the costs of copying the Form 652a, etc). However, a company can apply for striking off if it has settled trading or business debts in the previous three months.”
This course of action, known as a Section 652 striking off, is applicable where all creditors have been paid and final accounts and tax computations have been prepared, otherwise creditors can oppose the striking off and alternative, more expensive methods of dissolving the company would need to be taken.
Other things to consider before an application is made include closing the company’s bank account, transferring domain names, paying any professional fees involved with the striking off etc. These should be done before you apply for striking off, otherwise the assets may become the Crown’s property (see below) .
For example if your company ceased trading on 31 July 2008, you can apply under S652 from 1 November 2008. You can (and should) however distribute the assets prior to this date.
How much does it cost?
Assuming you are dealing with the striking off yourself, the Companies House fee is £10.00 and is sent along with a completed form 652a (download from http://www.companieshouse.gov.uk/forms/generalForms/652a.pdf ) . Professional fees, where applicable, would need to be agreed between yourself and your advisor and paid by the company before the bank account is closed.
Within 7 days of sending the form to the Registrar, all members, creditors, Crown departments, employees and any directors who have not signed the form should be sent full information as to the company assets and liabilities (a copy of the balance sheet) and a copy of the letter that was sent to the Registrar of Companies. Other examples include landlord, local authorities, especially if the company is under any obligation involving planning permission or health and safety issues, training and enterprise councils and government agencies.
Copies must also be sent to anyone who later becomes a notifiable party within 7 days of becoming so. There are guidance notes at Companies House which contain a full list of those who must be notified. Failure to notify interested parties is an
offence.
It is strongly recommended to obtain and retain some proof of delivery or posting of the above notifications.
What about the company’ assets?
The net assets left in the company which just prior to striking off are likely to just be cash and or equipment as any stock is likely to have been sold or written off. These can be distributed to the members (i.e. shareholders) and under HMRC concession ESC/C16 would be classed as capital distributions (ie your CGT annual exemption can be offset against it), provided that certain rules are followed.
To quote sections 3 and 4 of the HMRC manual …
- “The company satisfies the Inspector that:
(a) it does not intend to trade or carry on business in future, and
(b) it intends to collect its debts, pay off its creditors in full and distribute any balance of its assets to its shareholders (or has already done so), and
(c) it intends to seek or accept striking off and dissolution.
- The company and its shareholders agree that:
a) they will supply such information as is necessary to determine, and will pay, any CT liability on income or capital gains.
(b) the shareholders will pay any CGT liability (or CT in the case of a corporate shareholder) in respect of any amount distributed to them in cash or otherwise as if the distributions had been made during a winding-up.”
This concession only applies if the company is struck off and dissolved. The arrangement may be cancelled, and the full tax charged, if the company is not dissolved .
Make your distributions before the company is dissolved otherwise it goes to the Crown.
From the date of dissolution, any assets held by a dissolved company will belong to the Crown, the company’s bank account will be frozen and any credit balance in the account will be passed to the Crown.
This procedure is not an insolvency process.
The purpose of the Section 652 procedure is to remove a company that is no longer trading from the Register.
This article is a brief guide as to the requirements of a S652 application and cannot be taken as formal advice. Professional advice should be sought if you are considering this form of action. We at HRBS would be pleased to provide advice should you be considering dissolving your limited company.
Advice from licenced insolvency practitioners should be sought if you are considering or are required to undertake a formal insolvency.
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