Closing A Company

There are times when it is possible to plan for the closure of a business but not in every case. Depending on the reasons for closure a business owner should seek the advice of an experienced professional such as an insolvency practitioner, a lawyer or the company accountant to ensure matters are handled correctly.

Typically a company is closed for the following reasons:

  • A company is insolvent and unable to pay creditors
  • Shareholders are looking to realise their investment
  • Directors wish to leave the company and there is no succession plan
  • The business is no longer viable

A company can be closed in several ways:

Members Voluntary Liquidation

This option is taken when the directors and shareholders decide to liquidate a business with sufficient assets to clear all debts within a 12 month period.

Creditors Voluntary Liquidation

If the directors and/or shareholders decide that a business is no longer viable or in a position to continue trade, then they can decide to pass a resolution to place the company into a Creditors Voluntary Liquidation.

A creditors meeting is held following which an orderly realisation of available assets will occur.

If sufficient funds are subsequently realised creditors claims are agreed and a distribution of the available funds will take place.

Compulsory Liquidation

Compulsory liquidation occurs when one of the company’s creditors pursues payment by applying to Court for a winding up order.

Alternatively it may be used where the shareholders cannot agree that the company should go into Creditors Voluntary Liquidation.

Closing a company may not necessarily be an easy option. It requires a degree of preparation and understanding of areas such as tax liabilities, assets and the legal implications.