As a corporate solicitor, I am often asked ‘What is the easiest way of winding up my Company?’. The truth is that it depends on your circumstances and those of the company, and certain factors should always be considered before considering winding up a company. The more common methods used for dissolving, striking off or closing a company are:

Failing to file documentation at Companies House

Leaving your unwanted Company to be wound up by Companies House is not uncommon, as it is seen as the easiest and seemingly cheapest thing to do. Cease filing accounts at Companies House and let Companies House strike your Company off the register.

Application to close a company

This takes about 10 minutes online at Companies House and costs £8.

Insolvency procedures

Procedures such as liquidation (solvent and insolvent) and administration.

But none of these procedures should be used unless you have carefully thought about what the implications of each process is and whether it is right for the directors, shareholders and creditors of the company.

Important considerations

Some key factors should be considered before winding up or closing your Company:

• Are there any ongoing liabilities of the Company?
• Are there any assets owned by the Company?
• Have any warranties or guarantees been given by the Company?
• Will any consents be needed from the Company in the future?
• Will there be any tax implications?
• Does the company has any live contracts?

These factors can still live on even after your Company is wound up. Failing to be proactive and take these in to account early on could result in higher costs, and could even leave you personally liable for the debts of your Company.

Recent Example

In February 2020, Mr A had found a buyer for his house. The transaction proceeded swiftly until the buyer’s solicitor asked for a certificate from a property management company ManageCo. Without this certificate the transfer of the property could not be registered at the Land Registry. Normally obtaining such a certificate would not be an issue. However in this case there was a problem.

Due to the administrative burdens of managing ManageCo (filing dormant accounts and form CS01 annually), the directors of ManageCo had decided some years earlier to apply to Companies House to voluntarily strike-off and close ManageCo. Companies House obliged and did strike ManageCo off the register.

So ManageCo could not provide the required certificate to allow the transfer of the property. No sale. There was no simple fix. Only reinstatement of ManageCo would work.

Unfortunately because the directors had formally applied to Companies House for the strike off and closure, then the only way to reinstate ManageCo was to apply to court for an order to reinstate the company.

After several months, the order was granted and the sale of the property went ahead. In this case the buyers of the property were very understanding and waited, but that will not always be the case.

The directors did not understand the implication of what they were doing when they applied to strike ManageCo off the register. This cost them a considerable amount of money in legal fees, Companies House fees and Court costs. It also risked the sale of the property falling through. All in all, a very costly exercise.

So if you are thinking about striking off, dissolving or closing a company, please consider the implications and take advice. The downsides may be difficult to see and far reaching.

If you have any questions about dissolution, striking off or closing a company, or are thinking about it, please get in touch.