When it’s time to close your solvent company, there are two options: a Members’ Voluntary Liquidation (MVL) or a Company Strike-Off. Both serve the same ultimate purpose: bringing your company to an official end. But the processes, costs, tax implications and legal protections they offer differ significantly.
Understanding the key differences and potential risks associated with each option is crucial, especially if you want to avoid future complications.
What is a Company Strike-Off?
A Company Strike-Off, sometimes referred to as a dissolution, involves removing your company from the Companies House register. This process is straightforward and cost-effective, often appealing to directors of small companies with no outstanding debts or significant assets.
To apply for a strike-off, you must:
- ensure your company has ceased trading.
- settle all outstanding debts and obligations.
- close company bank accounts.
- notify all relevant stakeholders, including creditors, shareholders and employees.
Once the application (via form DS01) is submitted to Companies House, a notice is published in The Gazette. If there are no objections within three months, your company will be officially dissolved.
When might a Company Strike-Off be suspended?
Despite its simplicity, a Company Strike-Off can be suspended for several reasons, which can delay or even derail the process:
Objections from creditors: If your company owes money to creditors, they can object to the strike-off. This includes unpaid suppliers, lenders, or even employees.
Outstanding taxes: HMRC closely monitors strike-off applications. If there are unpaid taxes or VAT, HMRC can raise an objection, suspending the process until debts are cleared.
Unpaid Bounce Back Loans (BBL) or CBILs: If your company has outstanding COVID-19-related loans, attempting to strike it off without settling these can trigger government scrutiny, potentially leading to director disqualification.
Non-compliance with statutory requirements: Failure to file annual accounts or returns can lead Companies House to suspend the strike-off until compliance issues are resolved.
Risks of choosing a Company Strike-Off
While a strike-off might seem like the easiest option, it carries certain risks. Particularly if the company has hidden liabilities.
Potential investigations: Directors can face investigations for misconduct if it’s found the strike-off was used to avoid debts.
Company restoration: Dissolved companies can be restored to the register if creditors make a claim, reopening financial liabilities.
Personal liability: If the strike-off was mishandled, directors might be held personally liable for any forgotten, outstanding debts.
Ready to talk through the best solution for you? Contact us today for tailored advice on your company liquidation.
What is a Members’ Voluntary Liquidation (MVL)?
A Members’ Voluntary Liquidation is a formal process for closing a solvent company. Unlike a strike-off, it involves appointing a licensed insolvency practitioner to oversee the liquidation. The practitioner ensures all company assets are distributed correctly, and outstanding liabilities are settled before the company is officially closed.
What benefits does an MVL have over a Company Strike-Off?
An MVL is a more structured and responsible approach to winding down a business, which can be important for directors planning future ventures.
Greater legal protection: The involvement of an insolvency practitioner ensures compliance with all legal obligations, reducing the risk of future claims against directors.
Tax efficiency: MVLs can be more tax-efficient, especially for companies with significant retained profits. Distributions may qualify for Business Asset Disposal Relief (formerly Entrepreneurs’ Relief), reducing Capital Gains Tax.
Peace of mind: All debts are formally settled as part of the process, so there’s no uncertainty that a creditor’s been overlooked.
| Factor | MVL | Company Strike-Off |
| Legal oversight | Yes, via insolvency practitioner | No formal oversight |
| Cost | Higher due to professional fees | Low application fee |
| Tax efficiency | Favourable for large reserves | Less tax efficient for sums over £25,000 |
| Risk of future claims | Low, debts settled in liquidation process | Higher, as creditors can restore the company |
| Suitable for debts? | Yes, all debts are formally settled | No, you should be debt-free before applying |
When can you consider an MVL?
An MVL is often the better choice if:
- Your company has retained profits over £25,000.
- There are complex assets or liabilities to distribute.
- You want to ensure full legal and financial closure with minimal risk.
- Tax efficiency is a priority.
Which option is right for you?
Choosing between an MVL and a Company Strike-Off depends on your company’s financial situation and your priorities as a director.
Deciding how to close your company is a significant step with long-term implications. Speaking with a licensed insolvency practitioner can help you understand your options fully, ensure compliance with legal obligations, and avoid costly mistakes.
If you’re unsure which route is best, we’re here to help. Contact us today for tailored advice on MVLs, company strike-offs, and everything in between.
