Company dissolution: pros and cons

Dissolving your company, or applying to have it struck off Companies House register can be a straightforward and cost effective way of closing a business that you no longer require.  But it can’t be used for every business.  This quick list of pros and cons will help you decide whether company dissolution is a suitable option for your business.


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Company dissolution: pros

  • Having your company struck off the register is a much cheaper alternative to formal insolvency procedures.  Apart from the time costs, the filing fee is only £10.
  • It’s a relatively straightforward process that can be managed by you as company director.
  • The process usually takes in the region of 3-9 months from beginning to the company being formally dissolved.
  • There is no investigation into your directors’ conduct, which is a mandatory aspect of liquidation.

 

Company dissolution: cons

  • Your application to have the company struck off can be rejected by most stakeholders or interested parties.  If, for example, the correct procedure wasn’t followed when the company was dissolved; if they believe there are outstanding debts, or that you have traded wrongfully, they can reject your application.
  • They can also apply to have the company revived for up to 6 years after dissolution if, for example, they believe that the directors have committed fraud.
  • Furthermore, if, as company director, you are found to have outstanding liabilities when the company was dissolved, you may be held personally liable for these debts.
  • From the date of the dissolution, any assets still registered to the company will be frozen and credited to the Crown (although this is really just a question of properly getting all your ducks in line prior to dissolution).

 

The key factor that should determine whether you should dissolve your company or liquidate it, is your level of debt.  If you can pay off all your creditors prior to ceasing trading and dissolution, and you have no material assets to distribute, then this option may well be best for you.  If however, you cannot meet your financial obligations, then dissolution is not an option for your company. In such cases, you may need to consider voluntary liquidation.

 

Can we help you with this?

You are not required to use an an insolvency practice when dissolving your company, although many business owners prefer us to oversee the process for them.  We charge a flat fee of £900 plus VAT to do this.  

Feel free to contact one of our business rescue experts for more information.