Company dissolution is the simplest and can be the most cost-effective way to close a private limited company (LTD) or a limited liability partnership (LLP).

There are no liquidation costs and no investigation into your conduct as a director/member. You can set up a new business straightaway and even use the same business name as the dissolved company.

The process is cheap and easy. All it costs is £8 (online) or £10 (offline) disbursement fee to Companies House along with a number of envelopes and stamps notifying those outlined below. A DS01 form also needs to be completed.

If Companies House is satisfied you meet the dissolution criteria, a notice will be published in the Gazette giving interested parties two months’ notice of your intention to strike off the company/llp.

If no objections are received, the business will be removed from the Companies House register and will cease to exist.

Is a Dissolution Voluntary?

Dissolution ends a company’s legal existence by striking it off at the register at Companies House. It can be done voluntarily or done compulsorily by the registrar of companies if a director has been continually delinquent with filing returns and accounts. Being delinquent can carry penalties as severe as disqualification so is not advisable (although such instances are rare).

An insolvent company can seek a dissolution, but this is not the first course of action a director should consider for a limited company or LLP. Directors (or members of LLP’s) have an obligation to seek to effect an orderly wind down of an insolvent business.

This would be done via a voluntary liquidation (not dissolution) and they must document their attempts to do so. Where a voluntary liquidation is not possible, a winding up through the courts should be considered. But, where neither are possible then a dissolution may be possible.

Who do I need to notify about my company dissolution?

Within 7 days of sending your application to Companies House to strike your company off the register, you must send a copy of the application to employees, pension fund trustees and employees, members and any other directors, or interested parties who have not already been informed.

You should also let all existing (e.g. HMRC, the DWP, your bank, your landlord, any suppliers and customers) and contingent creditors (those with products under warranty for example), know of your intentions to close your company.

Rather than the creditors having to positively agree with dissolution, there is a 2 month window in which to object. If nobody objects, the company will be dissolved and a further notice will be published in the Gazette.

Who can object to company dissolution, and under what circumstances?

Anyone connected to the business can object to its dissolution – this generally includes shareholders, creditors, and employees. A number of circumstances can lead to an objection, including:

· Failing to inform all the necessary parties that the business is being dissolved

· An employee wishing to take legal action against the company, or a creditor beginning legal action to wind up the company

· It is suspected that directors have committed fraud, or traded unlawfully

· A part of the closure process has not been followed – this could include failing to cease trade, or changing the company name during the three months prior to the application.

How do those objecting know the company is being dissolved?

The company must inform all interested parties of the intention to close, by sending a copy of the application form within 7 days of its completion. A notice is also placed in the Gazette, alerting creditors and other connected parties to the company’s proposed closure.

As it is possible to search the Gazette for closure notices, it is easy for anyone with an interest to find out that the company has applied to be struck off.

How are objections made?

Objections can be emailed or sent by post to the Registrar of Companies at Companies House. Making an objection effectively suspends the dissolution application made by the company until the situation has been investigated further – usually for between three and six months.

It is worth noting that, if a creditor is owed money, they can object to the company’s dissolution even after it has been removed from the Companies House register, as long as they can provide proof that the debt exists.

What happens if the objections are upheld?

If Companies House upholds the objection, dissolution does not take place.

If however the company has been dissolved , an objecting creditor can petition the court for restoration to the register. This will then be followed by further action, e.g. winding up (liquidation) where investigations will begin into directors’ actions leading up to the dissolution.

Limited company directors can be disqualified for up to 15 years for misconduct, and in serious cases of fraud, may receive a prison sentence.

If you are considering company dissolution, or want to object to an application, do not hesitate to contact me at phil.ross@lucasjohnson.co.uk