The process of closing your company entails more than just closing the doors and walking away, irrespective of the size of the business. 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’s a solvent or insolvent winding up through which your business is closing, we run through a basic outline of compliance matters you’ll need to take care of to get it right.
Selecting the best approach to closing your business
You basically have two options through which to close your business. Solvent, if the company has the ability to pay its bills, and insolvent if it can’t.
If the company is solvent then an application to have it struck off the Register of Companies can be made, or alternatively the process of a members’ voluntary liquidation can commence.
In the event that the company is not able to pay its bills when seeking to close down, the interests of any creditors involved in the business will take legal priority over the shareholders, in which case the creditors’ voluntary liquidation process will need to be used. As part of this process, 75% of the shareholders will have to agree to liquidation, with the company put through compulsory liquidation should the shareholders not come to an agreement.
Informing affected parties
In addition to informing the HMRC of your plans to close down, all affected parties of the company need to be informed before you apply for liquidation or to have the company struck off.
Selling remaining inventory and assets
If the company is going through an insolvent liquidation, advice from an independent insolvency specialist will need to be sought, otherwise if it’s a solvent liquidation then you might be able to distribute some of the company’s assets to the shareholders. Either way, all remaining assets and inventory will need to be sold.
Settling outstanding debts
You’ll be required to pay back any outstanding amounts of money owed your creditors after informing them of your plans to close the business.
Paying employees and shutting down payroll
Before the business closes, all staff which is employed by the business will be entitled to their full, final pay, which may include holiday pay and the likes. The company will enter into insolvent liquidation if it is unable to pay its staff in full.
Business documentation such as your bank statements, receipts and invoices should be kept for seven years following the company’s liquidation or striking-off. This forms 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 probably need to make use of the services of insolvency specialists if you want 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.