FAQs - SFP Dissolution Centre

Should I dissolve my company?

Dissolution is the process by which you are able to close your company so that it no longer exists. This is known as “dissolving” your company or getting it “struck off” the Company Register. When a company is dissolved it ceases to exist as a legal entity and can no longer trade.

You are able to dissolve your company if it:

Has not traded or sold stock in the last 3 months;
Has not changed its name in the last 3 months;
Is not threatened with Liquidation proceedings; and
Has no current agreements with its creditors either informally or formally (such as a Company Voluntary Arrangement).

The decision to dissolve your company should be taken carefully and with a professional advisor to ensure dissolution is an appropriate way forward.

However, in general terms if the company:

has no further use;
satisfies the necessary criteria set by legislation; and
has no outstanding matters including any creditors, liabilities or contingent debts,

Then dissolution is normally a good option.

If however, the company

has no further use;
satisfies the necessary criteria; but
has outstanding creditors, liabilities, or contingent debts which cannot be settled,

Then liquidation is normally the right option.

If you are however unable to settle the costs of liquidation and / or creditor(s) are unwilling to wind up the company through the Courts then dissolution could be the only remaining option.

You will still need to understand in any event the risks of dissolution before proceedings.

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What are the risks of dissolving my company?

Yes, it is an offence if you:

Apply for dissolution when the company is ineligible to do so;
Provide false or misleading information in relation to the application;
Fail to notify relevant parties of the application within 7 days of commencement; or
Fail to withdraw the application if the company becomes ineligible.

The penalty if found guilty of committing an offence is an unlimited fine and a criminal conviction. If it is found that you acted intentionally in concealing the application, you could also be potentially liable for up to 7 years imprisonment.

Potentially, yes. Anyone found guilty of committing an offence may also be disqualified as acting as a director for up to 15 years.

Yes, The Insolvency Service is still able to take disqualification proceeding against a director of a dissolved company in instances where they feel the director’s conduct warrants such action.

Yes. The Insolvency Service can apply for a Compensation Order if the director is subject to a disqualification and their conduct has caused quantifiable loss to one or more creditors of a company.

No. A dissolved company can be restored either by its directors or shareholders in certain instances. In the case of any other interested party including creditors, restoration can be obtained by way of a court order. Reasons for restoration would include; to pursue an injury claim, pay liabilities, realise pension funds, complete a property transaction, realise assets and for a subsequently appointed liquidator to undertake an investigation into the reasons for the failure.

It depends upon the circumstances surrounding the restoration. If there are potential claims against directors or third parties that would be available through formal insolvency proceedings, an application can be made to place the company into liquidation and seek the appointment of a Liquidator to commence and oversee those claims.

What are the alternatives to dissolution?

If you simply stop trading and have no creditors / liabilities, then you are still obliged to undertake certain statutory requirements including submitting returns to Companies House and Tax returns to HMRC.

If you stop trading and your company has creditors / liabilities, then doing nothing may also (in addition to above) result in one or more of those creditors bringing legal proceedings in relation to any liability owed. This would be by way of debt recovery or winding up proceedings (this is dealt with in more detail in the section “Can Legal Proceedings Prevent Me Dissolving My Company?”).

Also, the Registrar of Companies can strike off a company if they believe that the company is not in operation. This usually happens when a company has not complied with filing requirements, although the Register of Companies can also issue fines as well as bring criminal proceedings against directors who fail to submit returns.

Dissolution is usually a good option when you can satisfy the statutory criteria and have no outstanding matters including creditors, liabilities or any contingent debts (subject to taking professional advice).

If however you have any creditors over a certain sum which will not be paid off, then you need to understand the risks as detailed in our FAQs. There are, in any event, 2 main options available as an alternative to dissolution. They are Creditors’ Voluntary Liquidation (“CVL”) and Compulsory Liquidation (“CL”)

A CVL is a formal insolvency process instigated by directors of the company by instructing a qualified Insolvency Practitioner to assist with the winding up and acting as the proposed liquidator.

A CL is a formal insolvency process overseen through the courts and normally instigated by a creditor(s) of the company which results in the official receiver being appointed as liquidator of the company.

In short it is best to seek professional advice on your specific circumstances and run through these options before deciding on what is the most appropriate route to pursue.

Our comparison table can be used as a simple guide, but must be accompanied with detailed explanation from your professional advisor.

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What are the circumstances preventing a company seeking dissolution?

A company may not make an application for dissolution if at any time in the last 3 months leading up to the application, it has:

Traded or sold stock;
Changed its name;
Been engaged in activities outside of the proposed dissolution and statutory requirements or
Bearer shares that have been either issued or any outstanding share warrants

Yes. A company cannot apply for dissolution if it:

Is subject to any insolvency proceedings (such as administration or liquidation); or
Has entered into an arrangement with its creditors.

Yes. An application for dissolution is more likely to be objected to if the company has:

Bounce Back Loan or Coronavirus Business Interruption Loan (CBILS); and
Outstanding liabilities owed to HMRC.

Yes. There is a list of various matters that a company should address prior to making a dissolution application, or whilst it is in progress. This is a substantive list and includes such things as making employees redundant, dealing with utility accounts and leases, ending the company’s involvement in a pension scheme, closing any PAYE scheme, de-registering for VAT and submitting final corporation tax returns.

No, not necessarily. Failure to satisfy all or some of the criteria increases the likelihood of the dissolution being objected to or Companies House rejecting it outright. This will depend upon the circumstances, and it is not necessarily fatal to the dissolution application being successful. That said, there are certain circumstances where you may have proceedings commenced against you personally for failing to do so (this is dealt with in more detail in the section “What are the risks of dissolving my company?”).

How does the dissolution process work?

Dissolution is a process that is usually undertaken by a company’s directors. However, some company’s provisions may require that the members approve a dissolution application. Accordingly, you will need to check the company’s Articles or Shareholders’ Agreement. Once the resolution to dissolve has been properly approved, you will need to submit a DS01 Form, together with the relevant fee.

Once Companies House has received the DS01, it will:

Register the dissolution information and publish this on the Public Register of Companies;
Send an acknowledgement to the contact address on the DS01 form;
Send notification to the company‘s registered office address;
Publish a notice in the Gazette indicating the company’s intention to strike itself off; and
Publish a copy of the Gazette notice on the Public Register.

If no objections are received, the company will be dissolved after two months from the notice in the Gazette has passed. A second notice will then be published in the Gazette and on Companies House stating that the company does not legally exist anymore.

Yes, dissolving your company is a relatively simple and cheap process that you can undertake yourself. If you have no assets and no liabilities it would be advisable to look to dissolve your company yourself. In less clear-cut situations, it is recommended to use a professional third party to understand the risks involved as well as consider alternatives.

You can apply to dissolve your company via Companies House using this link https://find-and-update.company-information.service.gov.uk/close-a-company/. The service costs £8.

Yes, you can dissolve your company if it still owes money to its creditors. However, there is a risk that one or more of those creditors may object to the dissolution (this is dealt with in more detail at “How Does the Objection Process Work?”).

Many Companies look to a third party to assist with the dissolution process. This is because there are various steps that need to be undertaken, which include notifying creditors and other interested parties. Having an external party do this may reduce the likelihood of the dissolution being objected to. Also, to give guidance and try to mitigate against any potential personal exposure.

How does the objection process work?

There are two categories of parties that can object to the dissolution of a company. These are:

The company’s shareholders or other interested parties, such as a creditor; and
Those who have a reason to stop the process, such as a party with a legal claim.

An objection can only be made after the notice that the company is going to be dissolved has been published in the Gazette. It must be made within 2 months of the date of the notice being published in the Gazette.

An objection is made by completing the requisite form. The objection must be accompanied with documentation that is less than 6 months old, showing the full name of the company and evidence supporting the reasons for objection (such as invoices or other paperwork to demonstrate that the company owes that party money).

After an objection is made, the objecting party has around 6 months to undertake further action, which would normally take the form of either debt recovery or winding up proceedings (this is dealt with in more detail at “Can Legal Proceedings Prevent Me Dissolving My Company?”). If no further action is undertaken within that timeframe, then the dissolution process will recommence. However, Companies House is likely to extend the suspension if the interested party maintains its objection.

Yes, unless the party wishes to remain anonymous. You can try to find out who made the objection by contacting Companies House enquiries. Alternatively, you can check your company’s registered office for any correspondence received by creditors or government agencies related to the dissolution process.

Once you have identified who objected to the dissolution of your company, you can try to take measures to resolve whatever the issue is. It is advisable to take professional advice before doing so, since certain steps may result in potential personal liability.

Can legal proceedings prevent me dissolving my company?

Creditors who object to a dissolution application have two options available to them, being debt recovery or winding up proceedings.

If legal proceedings are commenced and an objection is submitted, then the dissolution will be suspended. However, if they are subsequently abandoned for whatever reason, the dissolution will recommence unless there is another objection submitted.

Debt recovery proceedings against a company that is looking to be dissolved will have little impact save from delaying the process. This is because it will be highly unlikely that the company will have any assets against which the creditor can subsequently enforce proceedings.

Winding up proceedings against a company that is looking to be dissolved can have far reaching consequences. If the proceedings are progressed to their conclusion, this will result in the company being placed into Compulsory Liquidation. Either the official receiver or an Insolvency Practitioner who works within the private sector, will take the appointment as Liquidator.

The company’s affairs and the activities of the directors will be investigated by the official receiver and/or the appointed liquidator. This will be for the purposes of considering the directors’ conduct to assist the Insolvency Service in determining whether disqualification proceedings should be commenced. The appointed liquidator will also consider if there have been any antecedent transactions that have occurred, which can be pursued to recover monies into the estate for the benefit of the company’s creditors.

It is best to be open with creditors from the outset of the dissolution application, explaining the position. If an objection is still raised, then a further approach is advisable explaining the cost consequences of legal proceedings and the recovery prospects. In both instances, approaches from a third party acting on the company’s behalf in a professional capacity, may result in a more desirable outcome.

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