Are you a UK business owner wondering what it means to dissolve a company? You are in the right place because, in this blog post, we will answer the question, "What is a company dissolution?" and all its legal requirements, along with some other necessary questions. So, let's get started!
What is a company dissolution?
A company dissolution refers to the legal striking off or closing of a company, its trade, or its operations. A dissolved company can no longer enter into contracts or carry out any other activity related to its business.
A company dissolution can occur, either voluntarily or involuntarily. In involuntary company dissolution, a company faces bankruptcy, failure to file necessary business reports, failure to pay taxes and file returns, etc., which results in the closing of a company forcibly by the Companies House. On the other hand, voluntary company dissolution refers to the directors' decision to voluntarily close a company or strike it off the Companies House Register. The directors could decide to dissolve their company if facing financial difficulties or for a strategic move (for example, starting a new business).
Can a dissolved company still operate?
No, a company cannot still operate after dissolution because it does not operate legally. If your company attempts to continue trading or carry out any business activity after it has been dissolved, it could result in legal action being taken against you as the director or owner of the business.
Company dissolution: Conditions to be met
Now that you know the answer to "What is a company dissolution?", let's mention a few conditions required to be met before deciding to dissolve your company:
- Your company must not have traded or sold any stock for the previous three months.
- Your company must have kept its name the same over the last three months (No company name change).
- It would be best if you were not under the threat of liquidation.
- You must not have any agreements with creditors, like a Company Voluntary Arrangement (CVA).
- Informing HMRC (Her Majesty's Revenue and Customs) that the company is being dissolved and settling any of its tax liabilities
- You should set any outstanding debts and liabilities with creditors.
- You have to obtain the agreement of all the directors or shareholders to dissolve the company.
- You have to complete the DS01 form and other necessary documents, along with the final accounting, for the official dissolution of your company.
If all the conditions mentioned above are met, you can close off your company. If the conditions mentioned above are not met, you must liquidate the company you own voluntarily.
Dissolving a company with debts
If your company has debts, it is still possible to go through the process of dissolution, but before you do so, you have to settle all your debts and liabilities first. Your company might not legally exist but your debts will persist, so it is important for the directors to handle debts responsibly during the dissolution process. You can handle your debts by selling off your assets or through an insolvency procedure such as a company voluntary arrangement (CVA) or liquidation.
Notice of dissolution
As a company director, you must file a notice of dissolution with Companies House. A notice of dissolution is a formal announcement to inform the appropriate authorities about your decision to cease operations and trading. This triggers the winding-up procedure.
Dissolve a company online
In today’s world of the internet and technology, it is easier to dissolve your company online. You have to complete the necessary forms online through the Companies House website. If you want to ease the burden of managing the hectic procedures of closing a company, you can look out for company dissolution services provided by a reliable accountancy firm. This will ensure your company is dissolved legally and in compliance with the UK government.
Final thoughts
Company dissolution is the legal process of closing down a company, which means that it will no longer be eligible to trade or perform any activity related to its business. It is essential to check the eligibility criteria for company dissolution and fulfil all the requirements. If you are a UK business owner considering dissolving your company, check out our dissolution of a company services and let us help you quickly close a company.
