To dissolve a company voluntarily, the directors (or a majority of them, if there is more than one) must give their formal approval by passing a board resolution. However, some companies may include different provisions in their articles of association or in a shareholders’ agreement, whereby the members must approve any strike-off application – if not using the model articles (if not using the default model articles), or the company’s shareholders’ agreement (if any) beforehand if unsure. 

If a majority of the directors (or members) approve the dissolution, they can make an application to Companies House on form DS01. To be eligible for voluntary company dissolution, certain criteria must be met, as set out in Section 1004 and Section 1005 of the Companies Act 2006. It is only possible to apply to strike off a company if it: 

• is not the subject of any insolvency proceedings (e.g. liquidation) or a section 895 ‘arrangement’ or scheme;
• does not have other existing agreements in place with creditors – e.g. a Company Voluntary Arrangement (CVA);
• has not traded, sold off any of its stock, or otherwise carried on business in the last three months;
• has not changed its name in the last three months; 
• does not have any bearer shares in issue; and 
• has not engaged in any activity other than one which is necessary for the purpose of: 
  • making an application for dissolution or deciding whether to do so (e.g. seeking professional advice regarding the application or paying the strike-off application filing fee); 
  • winding up the affairs of the business (e.g. settling trading or company debts); 
  • complying with statutory requirements; or 
  • making a disposal for value of property or rights that, immediately before ceasing to trade or otherwise carry on business, it held for the purpose of disposal for gain in the normal course of trading or otherwise carrying on business. 

Provided that no objections are raised and there are no reasons to delay the dissolution, Companies House will strike the company off the register not less than two months after the date of the notice. 

Prior to a company being dissolved, anyone who has had dealings with the business, such as employees, HMRC, bankers and accountants, plus creditors and suppliers will need to be informed, so it can be a lengthy process if the company has had a complicated trading history. A set of closing accounts, VAT and tax returns, and formal PAYE returns will have to be prepared prior to closure. All debts will need to be paid in full, and the board also needs to ensure that it makes a list of all the company’s assets, as these will need to be sold or transferred out of the company’s name before the company is dissolved – if not, they will belong to the Crown. 

Any contracts the company has entered into, whether as a supplier or a purchaser, should be looked at to see whether they will be terminated, novated or assigned, and the board should decide how any capital remaining in the company will be returned to its shareholders. 

Voluntary liquidation 

Members’ voluntary liquidation (MVL) occurs when a company is capable of paying its debts but seeks closure. Applying for dissolution (striking off) is typically the simplest and most economical choice. However, if the company possesses significant assets or has multiple shareholders, a MVL may be considered, provided the company remains solvent.

Unlike dissolution, an MVL involves a liquidator overseeing the closure process. The liquidator assumes responsibility for informing creditors and settling outstanding company liabilities. After all debts are settled, remaining funds are distributed to shareholders, and the company is dissolved. 

Before considering an MVL, a majority of directors must sign a statutory declaration of solvency, affirming the company’s ability to pay debts for the next year. Following this declaration, the company enters MVL if members pass a special resolution to wind up within five weeks. At this meeting, members also appoint a qualified insolvency practitioner as liquidator, whose fees are covered by the company’s assets. 

In an MVL, creditors are typically paid off without direct involvement from the members. They provide evidence of their debts to the liquidator, who keeps shareholders updated on progress and addresses their queries or objections, including those regarding fees (if necessary). 

Unlike dissolution, an MVL involves a liquidator overseeing the closure process. The liquidator assumes responsibility for informing creditors and settling outstanding company liabilities. After all debts are settled, remaining funds are distributed to shareholders, and the company is dissolved. 

Before considering an MVL, a majority of directors must sign a statutory declaration of solvency, affirming the company’s ability to pay debts for the next year. Following this declaration, the company enters MVL if members pass a special resolution to wind up within five weeks. At this meeting, members also appoint a qualified insolvency practitioner as liquidator, whose fees are covered by the company’s assets. 

In an MVL, creditors are typically paid off without direct involvement from the members. They provide evidence of their debts to the liquidator, who keeps shareholders updated on progress and addresses their queries or objections, including those regarding fees (if necessary). 

Treating the company as dormant 

A ‘dormant’ company as defined by Companies House is one through which there have not been any significant company transactions within an applicable financial year. Companies House will determine whether or not a company is dormant. Significant transactions refer to any business activity that received income (such as investments) in a financial year. 

It does not include: 

• filing fees paid to Companies House; 
• penalties for late filing of accounts; or 
• money paid for shares when the company was incorporated. 

As a result, any transactions beyond those detailed above could compromise the dormant status of a company. 

If a dormant company qualifies as ‘small’ under the rules of Companies House, it can file ‘dormant accounts’ without the need to include an auditor’s report in its accounts. It must be noted that if a dormant company files later than a required deadline, or fails to do so within a financial year, penalties and other costs may be incurred. The board of directors are responsible for filling their accounts – in addition to incurring additional fines, non-compliance may result in Companies House opting to strike a company off of the companies register. 

Dormant companies in the UK are restricted from engaging in financial activities solely with the aim of avoiding becoming ‘active’ for corporation tax purposes. However, specific allowable expenses, such as incorporation fees or legal and professional fees, can be managed using a personal account without impacting the dormant status. In the event of an inadvertent significant transaction, a dormant company should rectify the situation by filing normal accounts instead of dormant accounts in order to reflect the activity accurately. 

When a dormant company restarts trading, it does not need to notify Companies House. When they file their accounts again, it will show that they are no longer a dormant company. Reactivating a dormant company can lead to tax liabilities if the company engages in trading activities and generates taxable income during the financial year. Such a company is required to inform HMRC within 3 months of their previously dormant company becoming active.