How to Close a Solvent Company – 7 Expert Tips

Share via

Starting a business is no longer a farfetched dream for people around the world. In the age of the internet and technology, it has become easier than ever to start your own company. Unfortunately, despite the immense help from the internet and other digital means, companies sometimes face roadblocks that they cannot always overcome. Still, others succeed and make significant profits. In many cases, the shareholders want to come out on top, so they decide to close the company when it’s doing well financially.

If a company is solvent, it means that its assets exceed its liabilities so that it can pay its creditors within a period of 12 months. To close a solvent company, you need to make sure you do it right and that no creditors are still owed any money. Here are some tips on how to close a solvent company.

Cease Trading for Three Months

The first approach to close a solvent company is known as dissolution or dissolving the company. This means getting the company struck off from the Register of companies. If you want to do that, you have to meet the eligibility criteria so your company could qualify for dissolution. One of the first and most important criteria is to cease all companies trading for a period of three months so you could move forward with the process.

Don’t Change the Company Name

If you plan on moving forward with the company dissolution, another criterion that you have to meet is not changing the company name over the past three months. You should review this process with your lawyers and accountants, but under no circumstances should you change the company name or trade for three months before filing for dissolution. Dissolving a company is relatively fast and puts an end to the business quickly and efficiently, so don’t make it harder on yourself by tampering with that three months limit.

Inform All Concerned Parties

In order to dissolve a company, you need to inform all relevant parties of the decision, including shareholders, creditors, employees, and pension fund managers. You also need to abide by all rules and regulations concerning paying any outstanding salaries to your people for this process to go through.

Find the Right Insolvency Practitioner for MVL

Your second option to close a solvent company is a members’ voluntary liquidation (MVL). This approach ensures a better distribution of the company assets, and the shareholders might make a better profit. As explained at, the key to the success of an MVL is hiring a qualified insolvency practitioner, which is the person or company that oversees the entire process. They will be responsible for distributing the company assets, dealing with creditors, and releasing the company funds when appropriate. The great thing about this approach is the fact that the potential tax savings to the shareholders will most likely outweigh the fees you’ll pay to the insolvency practitioner.

Get the Shareholders on Board

For an MVL to be successful, you need to get the approval of at least 75% percent of the shareholders, and they have to sign off on the process. So, you have to convince the shareholders that this is the right way to go, and they would be maximizing their profits by going this way.

Prove Solvency

The first step to a members’ voluntary liquidation is proving that the company is indeed solvent and can pay its debts to all creditors. To do that, you need to issue a declaration of solvency confirming that, and this declaration has to be signed by the directors of the company. After that, the insolvency practitioner can be appointed to proceed with the process.

Understand Your Options

If there is one tip that you must keep in mind, it is that you need to understand both options when it comes to closing a solvent company. Both MVL and dissolution have pros and cons, so you need to figure out which works best for your company. If your company has significant assets, then maybe an MVL would be the better option. If you can barely pay your creditors, then perhaps a dissolution is the way to go.

In any case, you need to consult with experts before making this decision. Review your company’s financial situation with professionals who can advise you on the best course of action. You should also always review the rules and regulations for both scenarios so you can get this process done as smoothly as possible and close your solvent company.

Share via
Samantha Acuna is a writer based in San Francisco, CA. Her work has been featured in The Huffington Post,, and Yahoo Small Business.