Dissolving a Company with Debt: Everything You Need to Know
Dissolving a company with debt is also considered a dissolution or striking off of a company.3 min read
Dissolving a company with debt is also considered a dissolution or striking off of a company.
Dissolving a Ltd Company in UK
A form can be downloaded, which needs to be signed by most of the directors. Copies of the letter need to be sent to shareholders, trustees or pension managers, employees, creditors, and directors after it is signed. An official disablement occurs once there is a second notice placed in the Gazette. This is the point where the company no longer exists and has no legal say in anything.
Is my UK company eligible for dissolution?
A UK company must meet certain criteria for it to be eligible for dissolution. A company must have had:
- No name changes in the last three months.
- No trading or selling of stock in the past three months.
- No threat of liquidating or other forms of not being able to pay off debts, or have any correspondence with a credit company, like Company Voluntary Arrangement (CVA).
Filling out Form DS01, Dissolution Paperwork to Companies House form also must be done. An acceptance letter from the Companies House will be sent as well. The London Gazette will publish the fact that your company has been dissolved when you receive your letter of acceptance about the ending of your company.
Closing a Limited Company with Debts (UK)
Ending a company may look like the only way to avoid paying unresolved debts by some. Debts must be paid back before a company can be terminated. The way those debts are paid off depends on how the company is able to do so.
A company can be terminated when particular steps are taken to resolve debts that the company is able to do. All creditors and director loans need to be paid off first.
A company can have an administrative ending or get a voluntary liquidation for creditors (CVL) if there are liabilities left. A CVL is the best step to take if there are assets that can be sold by the company that will benefit any creditors. A liquidator will be chosen to control the company and make sure it is running as the valuables are being sold. The company can be shut down when all the debts are paid off.
Once a company is dissolved, it is taken off the Companies House, also known as the registrar of companies. This is done since annual returns and other accounts don't need to be filed. A company no longer exists legally once it is terminated.
It is unwise to end a company without filling out and filing the proper paperwork. This is only doable if your company has a very small pool of liabilities and creditors. Shareholders and directors of the company may be responsible for debts if the process of termination is handled incorrectly or ignored.
Members' Voluntary Liquidation is the right way to dissolve a company's assets, where the company has assets that need to be taken out in a tax-related efficient way. Debts and assets need to be liquidated before the company's termination occurs. When the company is terminated, all assets go directly to the Crown, so make sure all assets, even digital ones, are sold before the company is completely terminated.
- Resolve any and all debts with creditors
- Sell remaining assets and move them out of the ownership of the company
Striking a Company off the Companies House Register (UK) to Dissolve It
Ending a company this way can be done if:
- Directors of the company want to retire, and no one is available to replace them to run the company
- The company is at a standstill and does not trade anymore
- The company is controlled by another company, where its name is not needed anymore
- The original idea of the company was to benefit from an idea that is no longer practical
The company also must stop trading, assets need to be identified, and all accounts of the company need to be filed. The company also must not be in a growing stage for three months to file for termination with the register of the Companies House.
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