When Should a Company Be Closed?
A company may need to be closed if:
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The business is no longer profitable
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Debts are uncontrollable
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Market conditions have shifted
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Directors want to retire or exit
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The company is dormant and no longer needed
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Creditors have issued payment warnings
Methods of Closing a Company
1. Voluntary Strike-Off (If Debt-Free)
A simple method for closing a company with no liabilities. Suitable for businesses that are inactive or no longer trading.
2. Creditors’ Voluntary Liquidation (CVL)
A formal insolvency process for companies that cannot pay their debts.
CVL allows directors to:
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Close the company legally
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Write off unsecured debts
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Stop creditor pressure
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Comply with legal duties
3. Compulsory Liquidation (Forced by Court)
This occurs when creditors file a petition.
Directors should avoid this route, as it impacts credit history and investigations become more strict.
Responsibilities of Directors During Closure
Directors must ensure:
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Accurate financial records are maintained
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Creditors are informed properly
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Assets are not transferred wrongfully
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No preference or wrongful trading occurs
Professional guidance helps directors avoid legal complications.
Conclusion
Closing a limited company is a structured legal process. When done correctly, it protects directors, reduces stress, and ensures compliance. Seeking professional advice early always results in a smoother, safer exit.