Company Dissolution

Dissolution is the legal process so shutting down a business such that is is no longer a legal entity, directors are released from their obligations and the company is struck off the register at Companies House.

When Is Dissolution Suitable?

If the company is inactive; or solvent with minimal or no assets; or insolvent but with creditors unlikely to object – then dissolution may be suitable and typically can cost as little as a few hundred pounds.

Should the company have debts but no assets, creditors can expect little or nothing from the proceeds of a liquidation. This lessens the likelihood of creditor objection and so possibly favours dissolution over a liquidation.

When Is Dissolution Not Suitable?

For solvent companies with shareholder distributions expected to exceed £25,000 a Members’ Voluntary Liquidation (MVL) is usually most suitable. This enables proceeds to be taken as capital gains tax rather than income tax so this can be more tax efficient and therefore overall cheaper.

For companies with creditors likely to object to a dissolution, a Creditors’ Voluntary Liquidation (CVL) is usually the correct procedure. A CVL raises the possibility of Government Funded Redundancy Payments which can cover the cost of the liquidation and leave money over for directors and other stakeholders.