Corporate Governance & Regulation

There are a number of reasons why you may need to close your limited company. This could be because the company structure no longer suits your needs, your business is no longer active, or the company is insolvent. You will usually need the agreement of all the company’s directors and shareholders to close down a company.

The method for closing down a limited company depends on whether it is solvent or insolvent. If the company is solvent, you can apply to get the company struck off the Register of Companies or start a members’ voluntary liquidation. The former method is usually the cheapest.

It is the responsibility of the company directors to ensure that all of a company’s assets and liabilities are dealt with before it is dissolved. For example, you have settled any outstanding bills and collected all debts owed to the business. Any assets or rights (but not liabilities) remaining in the company at the date of dissolution can pass to the Crown as ownerless property.

Where a company is insolvent, the creditors’ voluntary liquidation process must be used. There are also special rules where the company has no director, for example, if the sole director has died.

A company can also elect to become dormant. A company can stay dormant indefinitely, however there are costs associated with this option. This might be done if for example a company is restructuring its operations or wants to keep a company name, brand or trademark. The costs of restarting a dormant company are typically less than forming a new company.

A recent post by Companies House confirmed that they are now using new powers to challenge the registration of certain company names.

Extracts from their recent blog post is reproduced below:

“New powers to challenge company names  

These new measures build on existing controls on company names. Names cannot be the same as or too similar to an existing name, and certain terms are restricted, such as terms implying a connection to the UK government or using a sensitive word or expression.

Under the Economic Crime and Corporate Transparency Act, we can now also reject an application to register a name where we have reason to believe:

• the name is intended to facilitate fraud
• the name is comprised of or contains a computer code
• the name is likely to give the false impression the company is connected to a foreign government or an international organisation whose members include two or more countries or territories (or their governments)

We can also direct companies to change their name in more circumstances, for example, where the name has been used, or is intended to be used, by the company to facilitate fraudulent activity.

If a company fails to change its name within 28 days, we can now determine a new name for the company, for example, changing the company name to its registered company number.

We also have the power to suppress a name from the register while a company responds to a direction to change its name.

Failure to comply is an offence

If a company does not respond to a direction to change their company name within 28 days, an offence is committed.

It’s also an offence to continue using a company name which we have directed to change.

Company Names Tribunal

The Company Names Tribunal continues to be responsible for considering objections to the use of a name which is:

• the same as an existing name in which another person has goodwill
• sufficiently similar to that name that it is likely to mislead

We're confident that, over time, these new powers will make a difference to the accuracy and integrity of the information on the register and will help to make sure the UK remains a great place to do business.”

As well as filing accounts with Companies House, there is an important requirement to check that the information Companies House has about your company is correct every year. This is facilitated by the filing of an annual company confirmation statement. Companies House can prosecute a company and its officers for failing to file a confirmation statement and the company can be struck off. 

Companies House guidance on the confirmation statement entitled Filing your company's confirmation statement has been updated with new measures introduced under the Economic Crime and Corporate Transparency Act.

A confirmation statement must usually be filed at Companies House once every 12 months and rather than resubmitting data every year the confirmation statement only needs to be updated if you have changes to report. If there are no changes then you just need to confirm the information is correct and submit the statement. The due date is usually a year after either the date your company incorporated or the date you filed your last annual fee was paid. You can file your confirmation statement up to 14 days after the due date. Any necessary updates such as to the statement of capital, shareholder information and SIC codes can be made when submitting the confirmation statement.

There are now 2 separate forms for completing a confirmation statement. The Confirmation Statement CS01 should be used if your confirmation date is 4 March 2024 or earlier, to confirm that the company's details are up to date. Confirmation Statement form CS01 (new version) should be used if your confirmation date is 5 March 2024 or later, to confirm that the company's details are up to date. Existing companies will need to give a registered email address when they file their next confirmation statement with a statement date from 5 March 2024. 

It currently costs £13 to file your confirmation statement online and £40 if you send Companies House a paper form. These fees are set to increase to £34 and £62 respectively from 1 May 2024.

The Register of Overseas Entities came into force in the UK on 1 August 2022. The register is held by Companies House and requires overseas entities that own land or property in the UK to declare their beneficial owners and / or managing officers.

HMRC has recently published an updated list of the UK-regulated agents who have an agent assurance code and can complete verification checks on beneficial owners of an overseas entity. This is not a complete list nor does Companies House endorse or accept any liability for these agents or for any services they provide.

A UK-regulated agent must complete verification checks on all beneficial owners and managing officers of an overseas entity before it can be registered with Companies House.

They must be based in the UK and supervised under the Money Laundering, Terrorist Financing and Transfer of Funds Regulations 2017. They can be an individual or a corporate entity, such as a financial institution or legal professional.

After registering, an overseas entity will receive a unique Overseas Entity ID to give to the land registry when it buys, sells, transfers, leases or charges UK property or land. 

There are special rules which limit the ability to change your company’s accounting year end date. A company’s year end date is also known as its ‘accounting reference date’ and is historically set by reference to the date the company was incorporated. Under certain circumstances it is possible to make a change to the accounting year end and for some businesses this can have trading and / or tax benefits.

As a general rule, you can only change the year end for the current financial year or the one immediately before it. Making a change to a year end date will also change the deadline for filing accounts (except during a new company’s first financial year).

There is no limit to the number of times you can shorten a year end date but you can only extend the period to a maximum of 18 months once in every five years. The financial year can be extended more often under limited circumstances such as when the company has been put into administration.

A request for a change to an accounting reference date can be made online (preferred and quickest option) using the Companies House online service or by using a postal version of the Change of accounting reference date (AA01) form. No change can be made to a period for which accounts are overdue.

There is no overriding reason for using one date over another but there are a number of factors to take into account. The most common year end dates are usually 31 December (to coincide with the end of the calendar year) or 31 March (to coincide with the end of the tax year).

Companies House has announced that some of their fees will be changing from 1 May 2024. The last change in fees was April 2016. 

The fees have been calculated on a ‘cost recovery’ basis meaning that the fees are calculated based on what it costs to provide the services in question. Companies House state that they do not make a profit on their fees. 

As The Economic Crime and Corporate Transparency (ECCT) Bill has moved through Parliament, concerns had been raised on the current fee structure. Companies House say that these changes to the fees charged will ensure adequate funding going forward to recover costs incurred as well as to help fund the cost of the new powers introduced as part of the ECCT Bill. 

Prices shown below are some of the main changes from 1 May 2024: 

The full list of changes can be found here:
https://changestoukcompanylaw.campaign.gov.uk/changes-to-companies-house-fees/

If a company has stopped trading and has no other income, then the company is usually classed as dormant for Corporation Tax purposes. 

A company is usually dormant for Corporation Tax if it:

• has stopped trading and has no other income, for example investments;
• is a new limited company that hasn’t started trading;
• is an unincorporated association or club owing less than £100 Corporation Tax; or
• is a flat management company.

There is a special online form that can be used to advise HMRC if a company is dormant. The form can be found at www.gov.uk/tell-hmrc-your-company-is-dormant-for-corporation-tax. In order to complete the form, you will need the company’s name, 10-digit Unique Taxpayer Reference (UTR) and the date the company ceased trading. It is also possible to notify HMRC by phone or by post if the online option is not available.

HMRC can also send a notification if they think a company is dormant. This notice will state that a company or association is dormant and is not required to pay Corporation Tax or file Company Tax Returns.

Limited companies are still required to file annual accounts and a confirmation statement even if the company is dormant for Corporation Tax purposes.

A company can stay dormant indefinitely, however, there are costs associated with this option. This might apply if a company is restructuring its operations or wants to retain use of a company name, brand or trademark. 

A limited company is a company ‘limited by shares’ or ‘limited by guarantee’.

Limited by shares

This is the most common limited company structure. A limited by shares company is a separate legal entity owned by its shareholders and managed by its directors. In smaller limited companies, shareholders and directors are the same persons. Directors are employed by their company; they are not self-employed. Limited companies are required to pay Corporation Tax on their profits, not Income Tax. 

Limited by shares companies are usually businesses that make a profit. This means the company:

• is legally separate from the people who run it;
• has separate finances from its shareholders personal ones;
• has shares and shareholders; and
• can keep any profits it makes after paying tax.

Limited by guarantee

In essence, a company limited by guarantee is a limited company with no shareholders. Instead, the persons who set up the company – its members – guarantee to pay a fixed amount into the company if required on the winding up of the company. Usually, these guarantees are for small amounts.

This type of company is typically used by not for profit organisations and charities rather than trading companies.

This means a limited by guarantee company:

• is legally separate from the people who run it;
• has separate finances from your personal ones;
• has guarantors and a ‘guaranteed amount’; and
• invests profits it makes back into the company. Profits are not distributed to the guarantors.

The Economic Crime and Corporate Transparency Act received royal assent on 26 October 2023. The new Act provides Companies House with more power to reduce the abuse of corporate structures whilst at the same time tackling economic crime.

As part of the measures that will be introduced, Companies House will be streamlining the accounts filing options available to small and micro companies. At present, small businesses are able to file what are known as filleted accounts with Companies House. This means that these small or micro companies can choose not to submit a profit & loss account and/or director’s report to Companies House; accordingly, this information won’t be made public. Filleted accounts can be submitted whether or not a company has prepared full or abridged accounts. At a future date, the option to file filleted accounts will be removed. No date has yet been announced for the implementation of this change.

Other changes as a result of the Act include the following:

• Improving the quality of data on Companies House registers.
• New identity verification requirements for anyone setting up, running, owning or controlling a company in the UK.
• Transitioning towards filing accounts by software only.
• Confirmation statement changes introducing new requirements to provide a registered email address and to confirm that the future activities of the company will be lawful. 
• Changes to Companies House fees.
• Changes to limited partnerships.
• More effective investigation and enforcement powers for Companies House, and new powers to share data with law enforcement agencies and other government departments. 

HMRC must be informed when a non-trading or dormant company starts trading again and thus becomes active for Corporation Tax purposes. Companies can use HMRC Online Services to supply the relevant information. 

When a company has previously traded and then ceases to trade it would normally be considered as dormant. A company can stay dormant indefinitely, however, there are costs associated with doing this and certain filings must still be made to Companies House. The costs of restarting a dormant company are typically less than forming a new company. 

The following steps are required:

1. Tell HMRC that your business has restarted trading by re-registering for Corporation Tax.
2. Send accounts to Companies House within 9 months of your company’s year-end.
3. Pay any Corporation Tax due within 9 months and 1 day of your company’s year-end.
4. Send a Company Tax Return – including full statutory accounts – to HMRC within 12 months of your company’s year-end.

Whilst reporting dates for annual returns and accounts should remain the same. The Corporation Tax accounting period is different and is set by reference to the date when the company restarts business activities.