You have a great idea for a business and you register a company but it doesn’t quite go to plan. You want to close the business a short while later. There can be several reasons why business owners want to close a private limited company which can include the business not making the money expected, problems with suppliers, a lack of time or maybe just wanting to go back to being a sole trader.


Running a private limited company is not easy and if you are in the situation of needing to take a backward step, knowing how to close the company is part of the process. However, it’s not as simple as just stopping trading. For private limited companies, there are specific steps to take and procedures to follow, as well as legal rules and regulations to adhere to.

How do I close my company?

There are certain steps to take in order to dissolve a company, and there are also procedures to follow including notifying organisations, such as HMRC, of your intended plan. There are three principal ways of winding up, or closing, a private limited company:

  • Selling the company
  • Striking off a company
  • Winding up the company.

If the company isn’t working, rather than leaving it dormant, it is better to take action.

Selling the company

If your business has a good level of asset value, i.e. the company’s assets would be of interest to another party or competitor, there is the option to sell the company. Similar to winding up the company, the business owners or directors can opt to sell their shares to another entity. Once the company is sold, shareholders are relieved of their responsibilities and stocks are settled.

When considering selling the company, a detailed exit plan is necessary for a limited company which will include whether the sale will be a share sale or an asset sale. The decision will be based on a variety of reasons, such as financial or personal, but will be subject to tax implications for the seller and the buyer.

  • A share sale – this process is where shareholders sell their shares in a company that owns the assets and trade of the business. Essentially, the buyer purchases the entire company as a going concern. With this option, there is no need for the purchasers to negotiate new contracts for employees, customers, suppliers or other entities as the company will continue to trade in its current format.
  • An asset sale – this process is where the company sells a portion of or the entirety of its business assets. With an asset sale, the seller is the company and not the shareholders. The only things for sale are the assets that have been identified and agreed upon, which are subsequently transferred to the new owner. This sale option can include tangible and intangible assets, such as intellectual property. It also allows the seller to retain specific parts of the business.

Striking off a company

If the company is a solvent private limited company that has not traded for a minimum of three months, you can apply to have the company struck off the register at Companies House. Taking this option is also an alternative to liquidation.

Closing your business by striking it off the register will mean that the company no longer exists and cannot trade. Once you apply to Companies House to strike off your business from the register, a notice will be published in The Gazette. This will advise that the company intends to be struck off and this is three months’ notice. If no objections are received, the company will be removed from the register.

You can apply to have your company voluntarily struck off the register if:

  • The company is solvent
  • There is no outstanding legal action against it nor are there any creditor agreements
  • The company has not traded in the last three months
  • The company has not changed its name in the last three months
  • It has not sold any rights of property that is owned by the company in the last three months.

There are some scenarios where a company is struck off the Companies House register under a compulsory order, which is instigated by Companies House. This usually happens if the company has been non-compliant, such as repeatedly failing to file its confirmation statement and/or annual accounts.

Winding up the company

There are three forms of winding up a company:

  • Mandatory or compulsory winding up
  • Voluntary winding up
  • Defunct winding up.

Mandatory or compulsory winding up

If a private limited company owes money to a creditor – the company is usually insolvent – that creditor is within its legal rights to apply for a compulsory winding up order. The court appoints an official receiver as the liquidator of the company who then proceeds with winding up the company including:

  • Ensuring all company contracts are completed, transferred or ended
  • Ensuring the company ceases trading
  • Settles any outstanding legal disputes
  • Arranges for the sale of any company assets
  • Distributes among creditors any funds that have been collected.

Voluntary winding up

If a private limited company is solvent, then the owners can opt to voluntarily close the company. The business has to be solvent, viable and capable of repaying any creditors. There are many reasons why a company opts for voluntary winding up, such as a merger with another company or the retirement of the directors.

Liquidators are appointed by either the directors/shareholders or by the court to carry out the winding up process. Creditor meetings are arranged and an advert is placed in The Gazette notifying any interested parties of the winding up process.

Defunct winding up

Also known as Members Voluntary Liquidation (MVL), it is possible to dissolve a company that is solvent and with no debts. An MVL is a cost-effective way of closing a private limited company due to various reasons, such as directors’ retirement. The MVL will ensure that any surplus assets are returned to shareholders, once tax liabilities are settled, and reduces any risk to the directors of the company. Shareholders must be in agreement and all creditors must have been paid in full prior to applying for an MVL.

If you are looking to wind up your company, contact Leading UK for the best professional advice.