Strike- off or Liquidation – Which Option is Best for my Company

Strike-off and liquidation are two options through which directors can close their company. However, if you’re a director looking to close your company’s doors for the last time, your choices will depend on that company’s circumstances, including its solvent position.

Closing by striking off the company

In the UK, company directors can close their company by striking it off the register at Companies House. Doing so ends its legal existence and allows the directors to walk away.

While it may be the first choice for directors, the company needs to meet certain criteria to be eligible for dissolution.

Within the three months prior to the dissolution application, the company mustn’t have the following:

  • Traded.
  • Undergone a name change.
  • A non-finalised pension scheme.
  • Any legal or insolvency proceedings.
  • An appointed administrator or receiver.
  • Be subject to prosecution or disqualification.
  • Disposed of stock (though assets previously used as a means of trading can be disposed of).

Even if the company meets all the above criteria, you can still leave the company dormant to close at a later date.

You can strike the company off by visiting the Companies House website and filling out the form.

As stated in the above list, a company must be solvent to be eligible for dissolution. If the company is insolvent, creditors may object to attempts at dissolving it if it still owes them money.

Solvent company liquidation

Striking off the company isn’t the only way to close it. Directors can close the company through a Members Voluntary Liquidation (MVL) if they feel that the company has reached the end of its useful life or they wish to retire without a successor and the company has more than £25,000 worth of assets. The process can be a more tax-efficient and faster solution than dissolving the company, which is managed by a licensed insolvency practitioner.

An MVL is a solvent liquidation procedure, allowing directors to settle their liabilities and receive a quick, tax-efficient release of funds.

Insolvent company liquidation

As a director, you should always know whether the company is solvent or insolvent. If the latter is the case, you need to act in the creditors’ best interests. While closure may not be your only option to deal with insolvency, if the debts are of such a level that recovery isn’t feasible, you should put the company into an insolvent Creditors’ Voluntary Liquidation (CVL). This closes the company in an orderly manner, and the remaining debts die with it. After which, if the directors have acted in the company’s best interests, they can walk away and potentially start a new limited company.

Like an MVL, a CVL can only be carried out by a licensed insolvency practitioner.

Which option is right for your company?

Which closure option is best for your company largely depends on its circumstances.

Dissolution – if the company doesn’t have many assets and it fulfils the necessary criteria.

Solvent liquidation – if the company is solvent with more than £25,000 in assets, and the directors wish for a more tax-efficient closure than through dissolution.

Insolvent liquidation – if the company cannot repay its liabilities and recovery-focused insolvency solutions aren’t feasible, it should close via an insolvent Creditors’ Voluntary Liquidation (CVL). Afterwards, you can walk away from the company if you’ve acted in the company’s best interests.

Speak to a licensed insolvency practitioner if you need or wish to pursue liquidation.