If you are a director of a solvent limited company that has cease to trade, there are two options you can use to close down the business, these are called Striking off a Company and a Members’ Voluntary Liquidation.
Striking off is typically used for companies that have ceased trading and have no creditors. The process is relatively simple and can be done without professional help. MVL, on the other hand, is used for solvent companies that have debts but are able to pay them off in full.
The process is more complex and requires the assistance of a professional liquidator. As a result, MVL is more expensive than striking off. However, it can also deliver a tax saving option for companies with significant assets.
Differences Between Striking Off And Members Voluntary Liquidations
The differences between striking off and a members voluntary liquidation, is that one is simply removing the company from Companies House register, while a members voluntary liquidation is used when a company is formally closed down in a tax efficient way.
Voluntary strike off
The striking off process is simple and requires the company Director(s) to submit a form DS01 to Companies House for the small cost of just £10. The form must be signed by all or the majority of the company shareholders and if a member does not sign the form they must be informed immediately by the other existing Shareholders. If there are not enough shareholders willing to sign the DS01 form then the Director(s) can instead apply to have the company wound up through compulsory liquidation.
Once this application has been accepted by Companies House, a notice will be sent out to the companies registered office and a notice filed in the Gazette.
Although the striking off process is relatively straightforward, it is important to ensure that all necessary steps are taken in order to avoid any potential problems further down the line.
In order for a striking off to take place the company can only be dissolved if it:
- hasn’t traded for three months
- isn’t threatened with liquidation
- hasn’t changed name in the last three months
- hasn’t disposed of any stock in the last three months
- has no agreements with creditors, for example, a Company Voluntary Arrangement (CVA).
Members Voluntary Liquidations
A Member’s Voluntary Liquidation (MVL) is a process undertaken when a company is formally closed down in a tax efficient way. A liquidator is appointed by the company and the process to enter liquidation is quick, simple and easy. A company is legally solvent when the total value of company assets exceeds the total sum of its outstanding debts.
In an MVL, the directors of the company must provide a declaration of solvency to the liquidator, which states that they believe that the company will be able to pay its debts in full within 12 months. If the directors are unable to make this declaration, the company will be classed as insolvent and will undergo a different liquidation process known as a Creditors’ Voluntary Liquidation.
Once the MVL process has been completed, the company will be removed from the register at Companies House and will cease to exist.
While a members voluntary liquidation is aimed at businesses which wish to close down their company in with a tax advantage, striking off is aim at companies that have not traded, or have no assets or liabilities. Once an MVL has taken place there is little or no chance of any future liabilities returning to the company or its director(s), if the striking of route is taken directors need to be aware that the company can be re-instated to the register within six years (or indefinitely in the case of personal injury claims) if a court order is applied for by creditors.
If company directors are unsure which route to take in regards to Striking off a Company vs. Members’ Voluntary Liquidation they should make contact with our insolvency team who can offer guidance on the subject.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.