Companies, CVL, Insolvency|

Liquidation vs Striking Off

If you are thinking about closing your company then you should consider the options which are available.  In certain circumstances company closure could be as simple as taking steps to have the company struck-off the register, which results in the company itself being dissolved. 

Whether or not this option is suitable will depend on individual circumstances.  If you feel it is time to close your company, the difference between dissolution, compared to closure via voluntary liquidation, is explained here.

Applying for a company to be struck off the register

Companies House produced a comprehensive guide to strike off, dissolution and restoration, which can be found here.

The process starts with an application for voluntary striking off, which can only be made on behalf of the company by its directors, or a majority of them.  The process itself is simple and involves the submission of Form DS01 with a small fee of £10.  The procedure can only be used if the company is solvent and has not been involved in any of the following activities during the last 3 months, before the application:

  • Changed its name;
  • Continued trading;
  • Engaged in any activities other than those necessary for the purpose of dissolution.

A company cannot apply for voluntary striking off if it is the subject of insolvency proceedings or proposed proceedings. This includes an outstanding winding up petition or an existing arrangement between the company and its creditors.

Who to tell about the strike off application

Within 7 days of sending the application to the registrar you must send a copy to creditors, including all existing and potential creditors, all shareholders, and any directors who have not signed the form.  You must also send a copy of the application to any person who, at any time after the application has been made, becomes a:

  • director
  • member
  • creditor
  • employees, or the managers or trustees on any employee pension fund

This obligation continues until the company is dissolved or the application is withdrawn.  You will commit an offence by failing to send notice to the relevant parties, and could face a fine or, in the most serious cases, a prison sentence.

Voluntary Liquidation

The voluntary liquidation process, commonly known as CVL, is entered into on a voluntary basis in order to conclude a business and wind up the company.  In general, a CVL is likely to be the most suitable option when a company has been under financial strain and when the possibility of a successful turnaround has been exhausted.

A CVL cannot happen without the assistance of a licensed insolvency practitioner who will be able to provide you with advice on the process, and information on any other options.

If you decide that a CVL is the most appropriate course of action, then you will need to hold a meeting of directors to resolve this (or have the sole director record his / her decision). You then need to give notice to shareholders and creditors and follow separate procedures which allow the shareholders and creditors to approve the proposed liquidation.  After this process, the liquidation may commence and once it has concluded the company will be dissolved.

The costs incurred in relation to CVL are significantly more than applying for the company to be struck-off the register.  The reason for this is that liquidating a company is a legal process which can only be undertaken by a licensed insolvency practitioner, who is obliged to comply with legislation and other guidance.

Contact us

You can find out more about the CVL process and ways in which the costs can be covered by getting in touch with one of our team.  Keywood Group is a Licenced Insolvency Practice and has extensive experience in dealing with company closures or helping you to assess the alternative options available.  If you want further information, please contact us for a no obligation chat.

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