Dissolve a Private Limited Company

A private company that is not trading may apply to be struck off the register of companies. This situation may arise for several reasons - for example, when directors want to retire or when the name is no longer needed. A company that is undergoing insolvency proceedings, or that is likely to do so, cannot apply.

If you have a private company and it is not trading you should be aware that the simplest and least expensive method of closing it down is to apply for it to be struck off the register of companies.

This is quite a common situation that usually arises when directors of the company want to retire or when the owner/ sole director wishes to return to PAYE or self employed status. If you have a limited company that is insolvent or is likely to be insolvent you should not apply. If you would like your company to be struck off the register it is of the utmost importance that you must check with the main stakeholders of the company such as its creditors, employees or investors.

Copies of the form asking for dissolution must be given to the following groups within 10 days of the application being submitted: members, creditors, employees, managers or trustees, and directors who have not signed the form.

Insolvency proceedings before being dissolved

If the Registrar has reason to believe that a company is not carrying on business or is not in operation, its name may be struck off the register and dissolved without going through liquidation. A private company that is not trading may apply to the Registrar to be struck off the register. This procedure is not an alternative to formal insolvency proceedings. Can anyone supervise insolvency procedures? All liquidators, administrators, administrative receivers and supervisors taking office on or after 29 December 1986 must be authorised insolvency practitioners. Receiver managers and Law of Property Act (LPA) receivers do not have to be authorised.

Insolvency practitioners may be authorised by: The Chartered Association of Certified Accountants. The Insolvency Practitioners' Association. The Institute of Chartered Accountants in England and Wales. The Institute of Chartered Accountants in Ireland. The Institute of Chartered Accountants of Scotland. The Law Society. The Law Society of Scotland. The Secretary of State for Trade and Industry.

Directors of an insolvent company

The liquidator, administrative receiver, administrator or Official Receiver has a duty to send the Secretary of State a report on the conduct of all directors who were in office in the last 3 years of the company's trading. The Secretary of State has to decide whether it is in the public interest to seek a disqualification order against a director.

Examples of the most commonly reported conduct are: Continuing the company's trading when the company was insolvent. Failing to keep proper accounting records. Failing to prepare and file accounts or make returns to Companies House; and failing to send in returns or pay to the Crown any tax that is due.

Applying to have a company struck off the register

A private company that is not trading may apply to the Registrar to be struck off the register. It can do this if the company is no longer needed. For example, the active directors may wish to retire and there is no-one to take over from them; or it is a subsidiary whose name is no longer needed; or it was set up to exploit an idea that turned out not to be feasible. The procedure is not an alternative to formal insolvency proceedings where these are appropriate, as creditors are likely to prevent the striking off. Even if the company is struck off and dissolved, creditors and others could apply for it to be restored to the register.

A private company can apply to be struck off if, in the previous three months, it has not: Traded or otherwise carried on business. Changed its name. For value, disposed of property or rights that, immediately before it ceased to be in business or trade, it held for disposal or gain in the normal course of its business or trade (for example, a company in business to sell apples could not continue selling apples during that three-month period but it could sell the truck it once used to deliver the apples or the warehouse where they were stored); or engaged in any other activity except one necessary or expedient for making a striking-off application, settling the company's affairs or meeting a statutory requirement (for example, a company may seek professional advice on the application, pay the costs of copying the Form 652a, etc). However, a company can apply for striking off if it has settled trading or business debts in the previous three months.

A company cannot apply to be struck of if it is the subject, or proposed subject, of: Any insolvency proceedings (such as liquidation, including where a petition has been presented but has not yet been dealt with); or a Section 425 scheme (that is a compromise or arrangement between a company and its creditors or members).

What should I do before applying?

There are safeguards for those who are likely to be affected by a company's dissolution. If your company has creditors, members etc, you are advised to warn all the people listed in question 4, before applying, as any of them may object to the company being struck off.

It is also advisable to notify any other organisation or party who may have an interest in the company's affairs, otherwise they might later object to the application. Examples include local authorities, especially if the company is under any obligation involving planning permission or health and safety issues, training and enterprise councils and government agencies.