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In the UK it is remarkably easy and cheap to form a limited company. For less than £100, perhaps even less than £50, you can have a company formed in a matter of hours. This compares to the situation in many other EC countries where the costs can run into thousands and it can take weeks, if not months, to get a company registered.

But, if your business has come to the end of its life, either because you can’t rescue it or because you no longer want to keep it going, you will find that closing down a UK company can be far from simple.

Liquidation

The normal way to close down a company is by starting a process called “liquidation” or “winding up”. This is a legal process in which a liquidator is appointed to wind up the affairs of a company and at the end of the process the company ceases to exist. This process does not mean that all the creditors (those to whom the company owes money) will get paid.

There are basically three different types of liquidation:

  • Members’ Voluntary Liquidation: this is when the members (shareholders) of a company decide to put it into liquidation and there are enough assets to pay all the debts of the company. The members appoint and pay a liquidator themselves (or out of the assets of the company).
  • Creditors’ Voluntary Liquidation: this is when the shareholders decide to put the company into liquidation but there are not enough assets to pay all the debts of the company. The creditors appoint and pay a liquidator themselves (or out of the assets of the company if it has any).
  • Compulsory Liquidation: this is when a court makes a “winding-up” order for the company to be wound up, usually on the petition of someone who is owed money by the company, although the directors may also apply for a winding up order, usually because neither they nor the shareholders are able or willing to pay the fees – which can be high – for a voluntary liquidation. The court appoints and pays for a liquidator but can recover all or some of that from the sale of any assets.

If your company is unable to pay its debts it is said to be insolvent and should cease trading or the directors may become liable for the debts. If you suspect that the company is insolvent you must take professional advice and may need to liquidate the company, although it may be possible for licensed insolvency practitioner or a specialist business rescue advisor to negotiate arrangements with those to whom money is owed to keep the business trading. Note that being unable to repay shareholders does not make a company insolvent. They knew when they invested they could lose their money and are at the very bottom of the list of creditors who would only get paid after everyone else had been paid 100%.

So, take appropriate advice. However, there is an alternative to liquidation which I want to discuss next.

Dissolution

This is a simpler and cheaper method and is ideal for closing down companies which have no debts. However it can sometimes be used to close down companies which are insolvent – though this cannot be guaranteed.
In a typical case of a solvent company the steps would be as follows:

  1. The company should cease trading and carry out no further transactions, except those which are necessary to wind it up.
  2. Anyone that the company owes money to should be paid; otherwise they may object to the company being dissolved in this way. The company bank account should not be emptied or closed until all company debts have been paid. Any loans to or from any company directors or shareholders should be repaid.
  3. If any vehicles or equipment have been bought on any form of hire purchase, leasing or finance agreement, then the finance company should be contacted to establish the options for ending the agreement early.
  4. The company must apply to HM Revenue & Customs to (HMRC) have its VAT registration cancelled, using form “VAT 7” A final VAT return will need to be completed, and there may be a VAT payment due.
  5. If the company employs staff they should be issued notice and a final payroll run for them (bearing in mind that they may have redundancy payments due to them) and P45s issued. At some point the company will need to make a final P35 return of payroll information to HMRC.
  6. Any of the directors and the company secretary may wish to resign, though at least one director should remain in place to deal with the closure. Remaining as an unpaid director of the company should not affect their own personal taxes in any way.
  7. A final set of accounts will need to be prepared, and submitted to HMRC. However this is unlikely to be possible immediately after the company stops trading as there will be further expenses so a letter should be sent to the tax office informing them that the company has stopped trading, has no further taxable income, and will apply for dissolution in due course. Mention that final accounts will be forwarded in due course. If you do not do this then HMRC may object to the company being closed down.
  8. Any corporation tax should be paid from the company bank account. The company generally has 9 months from the close of business to pay this tax, but the company cannot be closed down until it is paid.
  9. Any money or equipment left in the company after all these expenses have been met should be paid out to the shareholders in proportion to their shareholdings. It may be worthwhile for the company to apply to HMRC to have such payments treated under Extra Statutory Concession C16. This treats all such final payments as capital gains instead of dividends and may result in less tax being due.

Once 3 months have passed since the business ceased trading the directors (or a majority of them) can make an application to Companies House to have the company struck off. You can get full details of how to do this from the Companies House website. There is a £10 fee and you can download all the forms free of charge.

If the company is insolvent then it still may be possible to use this process, however to do so you will need to get approval from all those to whom the company owes money by writing to them with a notice of intention to have the company dissolved. You have to confirm you have done this before Companies House will process the dissolution and if it later is proven that you didn’t write to everyone you could be guilty of perjury.

You probably will need advice on what to say in the letter but in general you need to explain that the company is insolvent, cannot pay its bills, and cannot continue to trade. Tell them that the directors want to dissolve the company but that if creditors object the company will have to go into liquidation and as there are no funds to pay for a voluntary liquidation one of them will have to petition the courts at their own cost.

Be aware however that even if trade creditors don’t object it is possible that HMRC will object if substantial sums of tax (Corporation, PAYE/NI or VAT) are due unless they can agree a repayment schedule with the shareholders or directors taking on personal liability. In this case, get professional advice before signing anything.

353 Responses to “How To Close Down Your Limited Company”

  1. Gareth says:

    Hi James

    I am so pleased I came across this website.

    Basically I have been trading now for 10 years as a LTD company.
    End of last year I made my only staff member redundant and also de-registered for VAT as our turnover had dropped.

    I have been putting into the business my own cash and I am also working it without taking a salary.

    I am worried about two elements, the first is that I owe VAT £5,000 and also rent of £5,000 which I don’t have. I am a retailer so also have stocks which are on payment plans over the 26 week period which at present I don’t have a problem with.

    However the takings over the last 3 weeks have been terrible. If things improve which they should then things will be ok, although I need to keep VAT off my back to enable the survival of the business, any advice on this front and also any advice if things don’t improve.

    Oh with regards to the suppliers with there goods they have it written into the contracts that the goods are theres until paid for in full, so if things don’t improve would I need to send these back to the suppliers which would reduce the debts of the company???.

    Oh on a personal note I have recently entered into a DMP for my credit card debts of £10,000

    Any help is much appreciated.

  2. Damien says:

    Hi James
    I started a Limited company for the online arena two years ago and the only cost (debt) I have incurred is from the bank for £2,400) whish is overdue.
    The company has not made a profit and I am due to sign on the dole as the company has not worked in the current, previous climate and as suchj want to shut this down so that I may gain emplotment via Job seekers allowance.
    I have no other company debts and I am the sole director, the company has never had any assets so could you please advise me what to do as i really want to inform the business bank that i wish to terminate the business as is has cost me any money I had in the last two years and now have no money to support myself!

    Thanks in advance for any information.
    Regards
    Damien

  3. Eddie says:

    Hi James,

    I posted on here a month or two ago and thanks for your advice then. In short the company owes £35k ish in VAT and Corporation tax.

    Companies house wanted to strike me off but HMRC rejected this as there are outstanding liabilities.

    HMRC paid me an unexpected visit (Debt Management) wanting the Corporation tax paid and on top of that I have a VAT inspection tomorrow.

    The Debt Management department said they are going to say the company is insolvent as i could not pay a penny.

    What should I do now in preparation, are they liable to take me to court?

    What happens next.

    Many thanks

    Eddie

  4. Joy says:

    Joy – contd – would it be better to try and scrap together the money to do the accounts and file the vat returns?

  5. Joy says:

    James – sorry to hear of your illness – hope you are feeling better soon – I did speak to an insolvency practitioner and the above was there advice also? Dont know what steps I can take to sort this out as we have no money!

  6. James Green says:

    Joan, my apologies for the delay in answering your question but unfortunately I was taken ill and had to go to hospital. If you owe £150k in VAT from just one quarter then you must have had sales of at least £750k – what happened to that? Even if your customer went bust owing £90k there should have been more than enough to cover the VAT. You say that a lot of the income was invested in the business. In what way? If the company has recent assets of any sort and you transfer these to another company at less than reasonable open market value you run the risk of being prosecuted and have the transfer declared null and void. Because of my illness I haven’t been able to finish the DIY kit but will do so in the next few days. HMRC are unlikely to take a kind view of losing £150k – they took Harry Redknapp to court over a tax bill of just £30k , the amount of tax they claimed he “evaded” and even with penalties and interest he would have owed them less that half of what you do. That’s leaving aside any profit the company has made (and if you sold £750k in one quarter you must have made some profit otherwise I’d have thought there would be a lot of input VAT to set against the liability).

  7. James Green says:

    Hi Joy, my apologies for the delay in answering your question but unfortunately I was taken ill and had to go to hospital. You really are in a bad situation and need some detailed advice which can’t really be provided in a public arena. You are taking a very great risk in hoping that HMRC will wind you up and that apart from an examination by the Official Receiver you will be able to walk away from this. Given your lack of any accounting records and the removal of cash from the company account to your husband’s account it is open to the Official Receiver to hold the directors personally liable for all the debts of the company. You could also be prosecuted for a number of possible offences. In the past the Official Receiver tended to be fairly laid back about this sort of situation mainly because of the difficulty in taking action but since the full implementation of the 2006 Companies Act in 2009 it is now much easier for them to do so. I can probably put you in touch with someone who could help you but of course they won’t do it for free.

  8. JOAN says:

    Hi James, I am about 2yrs old in business. It’s my first VAT return, and from it, I owe £150K. I do not have the ability to pay cos our only customer have gone bankrupt oweing us £90K and others was invested in the business with view of raising more businesses. I do not owe anyother person/company. I have submitted my first annual accounts to companies house and the 2nd is not due till September. I want to close down cos there is no reasonable or otherwise way of raising this fund. I want to start a new company different from this with a new name. pls, how do i go about it closing down, and HMRC? Thanks a great deal!!! I’ll buy your kit. is it ready?

  9. Joy says:

    Hi Thank you for this site.

    Our company is in trouble – we have not filed the last 3/4 VAT returns and in total prob owe about £30k in vat and £1-3k corporation tax. My husband and I are directors. We have some money coming in but it will never be enough to catch up on the debt. We are intending to start trading as a sole trader and not Vat register and take any existing clients to this new business. Over the next few weeks we will take the bank account to zero and stop trading under this name. We do not have company accounts completed for the past year and have just been asked for a late annual return from companies house. I have put off companies house at the moment as I do not have the registration details for online filing – once I get them I will file to buy some time. We will not be able to submit annual accounts as they are not done and I dont see the point in trying to pay around £1500 to have them done. Our other problem is that my husbands tax return is due and should have been filed online (31 Jan) – again we have a few days on this as we registered late and they said we would get an extra (15 days?) to do this. However as we have no accounts we do not know what tax may be owing – likely nothing as there were none to pay last year. So what do we do – do we guess at tax return figures based on last year – should i get someone to do accounts? (Although a director I have never done a tax return and never been asked for one – occasionally I have worked for someone else and this is only tax records for me. No money ever went from business account into my bank account) If we do nothing then as I understand it the revenue will eventually wind us up? We have been living on the money that prob should have gone to pay Vat but as I understand it we will be called before and OR to explain ourselves and they are unlikely to do anything re this? Will we have to at this point try and produce records/accounts or when/does anyone take our business records. I have loads of receipts etc but not done anything with them? Please advise – very scared re tax return situation of my husband and what we do re this and also re potentially being chased for the money we have taken from the company for ourselves – some was moved to husbands bank acc – most just withdrawn as cash to pay bills – will less questions be asked if we attempt accounts?
    Finally if we stop using bank account should we/can we close it down?
    With new sole trader status who needs informed – it will be in husbands name and what needs paid?
    Thanks in Advance

  10. James Green says:

    Hi Steve, there are various options open to you including simply paying a dividend to empty the cash out or closing the company down and making a return of capital. The best or better option will depend on a number of factors which are too complex to go into here but a lot will depend on your own tax position, why you are moving overseas, and possibly it may be better to keep the company active and take the profit out over a period of time. There is nothing to stop a non UK resident from being a director/shareholder of a UK company.

  11. James Green says:

    Michelle, Only you can decide whether or not your company is insolvent. Technically if it can’t pay its bills are they fall due it is insolvenmt but, and here is where only you can decide, if the directors genuinely think they can negotiate their debts with creditors or raise other funds or even trade out within a few weeks on months then it should be safe to continue trading. However what you should not do it to pay some creditors and not others and then go bust. This is called “preferring” a creditor and could lead to a legal challenge to have the money repaid and/or make the directors liable for all the debts of the company. Your safest bet is to write to all your creditors offering them all a proportion of their debt if they agree to allow you to dissolve the company without involving a liquidator. If they don’t then they will either have to put the companyt into liquidation or write the whole debt off.

  12. Steve says:

    Hello James
    Great site, and great source of info – thank you!
    Do you know what the process is in terms of closing down a UK Ltd Company (I am the sole shareholder) and moving the retained earnings overseas? I am emigrating, and have retained earnings in the company. I wish to close the company, pay any outstanding tax, and take the net company profit overseas with me when I emigrate.
    Thanks
    Steve

  13. Michelle C says:

    We own a retail shop which is in trouble and we are now in a position where we owe more money than I have in stock! It is set up as a ltd company. This may well be an obvious question but are we ok and should we put up the closing down signs and sell as much of the stock and equipement to pay the creditors WE want to pay prior to involving a liquidator and besides which we really do not have any money to pay a liquidator.
    Kind regards
    Mich

  14. Carl Starr says:

    Hello James. Firstly I would just like to say what a great site and very useful resource this is.
    I would be very interested in purchasing your DIY booklet when its available.

    I current run a small business (limited company)reselling specialist engineering components and have come across an opportunity to purchase a similar smaller limited company. There is only one owner director / employee, so no complications there other than they just want to remove themselves from the business as cleanly and quickly as possible. Because the owner has very little capital they want to do the transfer without solicitors etc. I am trying to find the most economic but safe way forward for us. My thoughts are as follows I would like to reach an agreement to purchase the stock they have, confirm transfer of the distribution agreement they have with their prime supplier, check out the current accounts and ensure that all their debts can and will be paid.
    As ultimately I don’t particularly want to run two separate limited companies I would like to close the purchased company down, but still run it under its name without the limited, but as an XYZ Trading As ABC, so all the business managment and accounting would then come under my existing business.
    Does this sound feasible? what are the pitfalls, what procedurs do we adopt to close the company and can you suggest an action plan as I have never done anything like this before. Just as a bit of background, my existing business has been going for nearly eight years and is owned by myself and wife only, we have fortunately consistently made good profit and are in a position to fund the acquisition from our company resources without overstretching ourselves financially, our turnover last year was around £265K, the company we are looking at purchasing is currently turning over around £60K with similar % gross margins to ourselves. I look forward to you advice. Please feel free to reply via my email if you think it more appropriate.
    Regards
    Carl

  15. James Green says:

    Darren most of what you are asking is contained in the article and expanded on in the comments so have a good look through them. The DIY kit will be available by the end of this month (January) so keep an eye out though I’ll try and email you when it is ready.

  16. James Green says:

    I’ll do that Sean – it will be ready by the end of January.

  17. James Green says:

    Jen, depending on your company’s Articles of Association and/or any Shareholders’ Agreement (and I’m assuming neither will be of use here) then you have a position where the shareholders cannot pass any resolution unless they both agree. The same would be true if there are only 2 directors which I assume is the case. In these circumstances the Appeal Court decided several years ago (again related to a divorce situation) that the company had to be wound up and it was not the place of Divorce Court judges to agree anything else. You therefore would seem to have the upper hand. But you need to check the Articles and any Shareholders’ Agreement (if you have one which most do not). Contact me by email if you want to discuss.

  18. James Green says:

    Adam, there could be complications about what you are proposing. It is possible but if not done correctly (a) your wishes could be overturned; (b) they could be held to be unreasonable; and (c) there could be unfortunate tax implications. All of these have financial implications that might cause any third party to decline to act. Can I suggest you send me an email and we arrange a short discussion offline?

  19. Darren says:

    I have a Ltd company that I wish to close down , as is the way of things at the moment I have ended up supporting the company out of my own funds for thelast 6 months.

    I do not owe any money , zero VAT return for the last 3 months, Corporation Tax will not be due as company made a loss in the last 12 months.

    How much will it cost me to close it downa nd how long will it take ?

    Also, you mentioned a DIY kit in an earier post, any news on this as may be interested !

  20. Sean says:

    James Green
    When your guide is done, can you e-mail me a link to it so I may be able to buy it?
    Thanks
    Sean
    sguthrie@tcsmedia.co.uk

  21. jen says:

    hello i am hoping someone can help. i am a 50% shareholder of a limited company and also one of the directors, the other director is my ex. he keeps theatening to go into liquidation if i dont sell my shares for a pittance. Can he do this or can i make him sell up completely. thanks anyone who can help.

  22. Adam says:

    Hi James,

    I’m the sole Director and shareholder of a limited company and about to write my Will. In it, I’d like to stipulate that my company be closed down upon my death and any funds after taxes etc added to my personal finances for distribution among my beneficiaries.

    Is it a straightforward process for someone outside of the company to close it down in a situation like this?

    Many thanks
    Adam

  23. James Green says:

    Hi Daniel – A company voluntary arrangement (CVA) might be a way forward but there may be some up front costs. If you try to make some sort of private arrangement then all it takes is for one creditor owed more than £500 to put the company into liquidation. Your factor has a legal charge on 11k so you might be best spending some of the 2k left over to get a CVA in place. Send me an email if you want to discuss this further.

  24. daniel cross says:

    Hi James

    i own a LTD company and we are in a spot of trouble we have around 32k debts with 13k due in 11k of the 32k is due to my factoring company so effectivly we have no funds due to us.

    We have contracts in place witch will provide income over the next 6months..

    as we have no funds we cant approach a IP to liquidate the company is there an alternitive method? i have thought about writing to my creditors and offer extended payment plans for the debts as if i go under they will get nothing and if they liquidate me they still get nothing?

    thanks.

  25. James Green says:

    Eddie, Write back to HMRC and say that the company is insolvent and you have come to the conclusion that it must stop trading. Say that you do not have the money to appoint a liquidator and that if they (HMRC) do not remove their objection you will have to leave the company to be struck off by Companies House. Alternatively they can apply to the court – at their cost – to wind up the company. See what they say.

  26. Eddie says:

    Hi James,

    Many thanks for coming back to me so quickly.

    I’ve had a letter from HMRC saying that they received notification from Companies House to remove my company from the Register of Companies.

    HMRC have rejected this because there are tax arrears. HMRC have stated that until the arrears / out standing tax are received they cannot agree to the company being removed.

    What would you suggest I do next?

    Many thanks indeed

    Eddie

    Thank

    Eddie

  27. James Green says:

    Eddie, it is likely that when Companies House publish the notice of intention to strike the company off HMRC will object. You could wait and see if they do. If they don’t then they can’t take action against the company and highly unlikely they could take action against you personally at some future point.

  28. eddie says:

    Hi James,

    I am trying to close down my Ltd company however its has HMRC as its only creditor. The company owes both corporation tax and VAT totaling about 35K.

    Companies house are proposing to strike me off but i’m concerned about the revenues stance or actions against me.

    what do I need to do?

    Thanks

    Eddie

  29. James Green says:

    Richard, you can either do nothing – file no returns or accounts – and eventually Companies House will dissolve your company. Strictly speaking it is an offence not to file accounts or returns (and you can be fined over missing returns anyway) but action is seldom taken and given the low level of debts I doubt it would be here. However, there is always a risk and to be safe you should dissolve it as described here. Hang on a couple of weeks and you can buy my DIY kit if you like.

  30. James Green says:

    Hi Russell, one can never be sure but I can’t see why you should not be able to simply liquidate the company as described in this article. I hve been promising to publish a DIY guide with template letters for some time now and have worked on it but I promise to have it ready for purchase by the end of January at the latest.

  31. James Green says:

    Michelle, do read all the article and the comments. There are a lot of these and you may have to scroll though quite a few pages. Also I will shortly be publishing a DIY guide to closing down your company so keep an eye on this page.

  32. James Green says:

    Sorry Pat, I’ve been busy with some capital raising projects for clients. Will get to it by the end of this month I promise.

  33. James Green says:

    Hi Peter. If there are no debts or other problems with your existing company then just hang onto it and use it – and the bank account – for your new business. It used to be that the Memorandum of Association of companies had to state what activity or activities they could carry out and a whole lot of other stuff such as being able to borrow money, for example. What happened was that the Memorandum used to list hundreds of activities and then ended up with “and any other activities which the directors feel may be beneficial to the interests of the company”. Rather pointless. So, since 1985 the default position with UK companies (and it isn’t necessarily the same for other countries) is that a company – as a “legal person” can do anything that a “natural” (living) person can do so there is no need to spell it all out in the Memorandum. You can even change the name of the existing company (I think it costs about £10) if you want.

  34. James Green says:

    Steve, There would appear to be nothing to stop you closing down the company – with or without a liquidator as explained here – and there will be no direct problems for you or for your other company. However, you might find that at some future point a search might show that you were the director/owner of an insolvent company and anyone offering credit to you or another company might be reluctant to do so without a personal guarantee, if at all.

  35. James Green says:

    Peter, there is such a lot here that I honestly can’t deal with it in a blog reply. However one point that you – and others – might want to bear in mind is that the position over “trading whilst insolvent” is really a subjective one. The appropriate legislation sets out an objective position (if the company cannot pay it’s bills as they fall due it is insolvent) but the practice of common law has provided that IF the directors think there is a reasonable chance that they will be able to pay their bills, perhaps by agreeing delayed terms with suppliers or raising loans for banks or private lenders, then the company is not insolvent. However its that word “reasonable” that has to be justified should anyone take issue somewhere down the line. If you want more specific advice send me an email and we can take it up offline.

  36. James Green says:

    Have a read through the post and the comments emma mac – it’s all there.

  37. Richard Carman says:

    Hi, took over a company in april 2011, lasted only 4 months, there are minor debts of less then a £1500 to a couple of companies, which have told me not to worry, and written off. I have no money and wish to cease trading properly, not just leave it, any advise.
    Thank you
    Richard

  38. Russell says:

    Hi James,

    Thank you in advance for your help and assistance.

    Debts: £4K (Corp Tax), £600 (Vat), £180 (PAYE),

    Creditors: £2K

    No Assets

    Do you think I will get away with voluntary Liquidation with HMRC and Co House with regards to the above position with my company?

    And If I write to all of the creditors to tell them the company is being dissolved and I am going into voluntary liquidation as there are no assets or funds available, do you think I will get any of my creditors taking action in light of the small debts?

    Is it HMRC and Companies House that I have to write to and do I use the words posted above?

    Kindest regards

    Russell

  39. Michelle says:

    I wonder if anyone can help me. I have run a business for 10 yrs a Ltd company we have struggled on the past few years but we have been putting more money in that taking – that and finding many people taking advantage as they themselves struggle – we are now at a place were we have been unable to continue leasing the premises and we have no choice but to close. In terms of debt we have credit card £1750, bank overdraft £2500 and a gas bill £1000. I can not afford t shell this out my partner is now unable to work due to disability and I can not afford a IP. Any advice or suggestions, I just don’t know where to go and have seen this page on my search for help!!

  40. Pat says:

    Hi James

    Have you finalisee the publication of your guide/toolkit yet? I keep looking, but can’t find anything?

    thanks pat

  41. Peter Sullivan says:

    Hi James, excellent article.

    I’m have a limited company which I want to make dormant or close. In about six months time I intend having a business which sells completely different things, i.e. the current one sells services, the new one will sell physical products over the internet. Do you know if it is compulsory to close my business account and open a fresh one for the new business? The existing one (with Santander) is currently free, but the new one wouldn’t be. And is it advisable to use a completely new limited company for the new business, or do you think using the existing company would be okay? It seems impossible to find out information about such things on the Internet, with no articles making mention of such things.

  42. Steve says:

    Hi

    I own a small fitness studio but stopped trading back in March as I couldn’t get enough income from it for it to sustain itself. I’ve put in a huge amount of my own money as loans (somewhere in the region of £90k) to get it all set up and keep it going (paying staff etc) until I decided to stop trading. So at the moment it’s just an empty space and I’m still paying the lease, service charge, business rates, and other bills on an ongoing basis until the lease runs out so that I can then wind up the company.

    I’ve never taken a penny out of the company since it has been set up.

    Am I able to simply wind the company down now, appoint a liquidator to sell off any assets and effectively get out of my lease early? (I didn’t offer a personal guarantee on the lease when I took it out, it was all through the company).

    What I don’t want is for the landlord to be able to come after me personally (as the director and sole shareholder) for the remainder of the lease.

    Also, I have another limited company which is my main source of income (i’m self-employed contractor), the gym was a sideline business, would induing down the company with outstanding lease arrangement have any implications on my other limited company?

    Thanks in advance for any advice

    Steve

  43. Peter says:

    Hello James,

    First of all, thank you for taking the time to read and reply to this. Finding your site is such a relief and offers me some hope that we can find a ‘clean’ resolution to our issue.

    We have a marketing agreement that takes us to Nov 2012 for which we pay a minimum licence fee of 10k a month. The only way we can break this agreement is if either party ceases trading or becomes insolvent. Our revenues have dropped substanitially and we are unable to pay our liabilities as they fall due from the company’s cash or assets, although myself and my partner have been injecting the funds to keep the company trading when we have hit these troughs. I am now unable to continue this and my partner’s circumstances have also changed (divorce) meaning he may also be unable to continue to fund the company. This is the issue – the uncertainty. One minute we can, the next we can’t. If I was 100% certain we could not raise any more funds, I would immediately cease trading. But I need to be sure that I am not breaking the law by continuing to trade as there is still possibilities of further funding, albeit looking less likely by the day as the liabilities increase.

    The marketing agreement is a licence fee for a software product and not like we actually take tangible products from the supplier – so they aren’t out of pocket from us. We have generated hundreds of thousands in revenue for them and their greediness and reluctance to renegotiate is one of the reasons for our slow demise, so I have no moral obligations to them. Apart from 10k monthly liability for the marketing agreement, we also have approximately 20k of debts due to other marketing companies which I would like to prioritise with any funds we do realise to maintain reputation within the industry. Is this legally wrong?

    I also have another (low entry cost) project I am developing with another partner, so if this all goes belly up, will I be excluded from being a director on that company? Basically, that project has the potential to grow organically and we don’t want it to end up just paying for the other product to survive, so want to keep it entirely separate. Is this acceptable or am I prohibited from doing this?

    Many thanks for your help and apologies for the lenghty enquiry…

  44. ema mac says:

    I need help! my Ltd compony has to stop trading a month ago as i had creditors wanting paying, i ended up with the bailiffs in. i can’t afford a liquidator so how do i wrap up the business and contact the creditors.

  45. James Green says:

    Antony, it sounds to me as if you could do with speaking to an accountant rather than to an IP specialist to see if the company can be dissolved. Have you given your staff notice? What are your likely redundancy costs?

  46. Antony says:

    Hi, I need help from an Insolvency Practitioner (IP) to cease trading on my Ltd company (trading for 18 months). There are no significant creditors. Outstanding debtors mainly 3 months of Vat (£5000), 2 months of Paye/NI (£3,500), 1 month of staff wages (£5500). There are no assets and the business will not continue in any form.
    I have not been able to find an IP that I can pay for a few hours of help and advice in closing down (out of my own pocket). I am concerned that I get things done correctly for the staffs claim and to not give a problem with the Vat man. Does anyone have any recommendations on a decent firm/person?
    Many thanks for any pointers.

  47. James Green says:

    Paul, I see if I can find someone to help you.

  48. James Green says:

    Paul, VAT is not an issue as you clearly are under the limit to register. You need to stop trading. Write to all the people to whom you owe money explaining the company is insolvent and say that you can’t afford to pay to liquidate it and would prefer to dissolve it for which you need their permission. If they don’t give it then they will have to pay to make the company bankrupt.

  49. James Green says:

    Dee, there is no legal requirement to pay an accountant to do your accounts. You will find several articles on this site explaining the position. In my opinion a fee of £1,400 seems high. You can dissolve the company – subject to getting your creditors to agree – as explained in this article but you may still have to get the accounts done. There are books (mentioned elsewhere on this site) that can guide you how to do them yourselves. Alternatively seek out another accountant who might do them for you more cheaply. Here are some links: Accounts Demystified Finding the Right Accountant http://link4business.info/downloads/free-business-guides/accounting-and-taxation-for-small-businesses-2/

  50. James Green says:

    Sylvia, so long as you don’t set the new company up with a very similar name you should be OK. The official receiver will need all the files and records of the business and will interview the directors but assuming you haven’t done anything illegal there is no reason why you can’t walk away from the debt laden company.

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