Liquidating a dormant company

Section 1169 Companies Act 2006 defines dormancy as having no ‘significant accounting transactions’ in the relevant period — effectively no trading activity. Specific exclusions from the ‘significant transactions’ test include payment of company filing fees, payment of penalties for late filing, and shares taken by subscribers.

• ›Dormant company can still hold cash and assets — dormancy refers to transaction activity, not asset holding.
• ›Dormant company can have creditors and debtors — rare in practice but possible (e.g., contingent liabilities, unfulfilled customer commitments).
• ›Dormant company files dormant company accounts (form AA02) at Companies House annually.

Route 1 — Voluntary strike-off (DS01)

The simplest and cheapest route. Form DS01 filed at Companies House under section 1003 Companies Act 2006. After 2 months (with no objections), the company is struck off and dissolved.

• ›Cost — £10 Companies House filing fee (no IP fee).
• ›Time — approximately 2–3 months from filing to dissolution.
• ›Eligibility — section 1004 CA 2006: company hasn’t traded or changed name in last 3 months; not subject to insolvency proceedings; no pending creditor claims.

Limitations — bona vacantia means any company assets at dissolution pass to the Crown (distribute cash first); no BADR or capital treatment for distributions; creditors can object and trigger restoration for 6 years under s.1024 CA 2006; and the Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Act 2021 specifically targets directors who use strike-off to avoid BBL liabilities.

Route 2 — Members’ Voluntary Liquidation (MVL)

The tax-efficient route for solvent dormant companies with substantial reserves to distribute. Reserves are distributed as capital (not dividend), with BADR available where qualifying (14% effective from April 2025; rising to 18% from April 2026).

• ›Cost — £2,500–£3,500 + VAT for simple MVL.
• ›Time — approximately 3–6 months from engagement to dissolution.
• ›Eligibility — company must be solvent; directors sign statutory declaration of solvency under section 89 IA 1986.
• ›Threshold for use — typically reserves of £25,000+; below that, the tax saving doesn’t justify the IP fee.

Route 3 — Creditors’ Voluntary Liquidation (CVL)

Required if the dormant company is technically insolvent — liabilities exceed assets — even where actual creditor pressure is absent. Common scenarios:

• ›Outstanding BBL — the BBL liability often exceeds remaining company assets, making the company technically insolvent. CVL is the correct close-down route.
• ›Contingent liabilities — unresolved warranties, tax assessments, or pending disputes that exceed assets.
• ›Historic HMRC arrears — VAT, PAYE, or CT accumulations that were never paid.
• ›Director loans owed by company — where the company owes directors more than its remaining assets.

Cost — £2,500–5,000+ VAT for a simple dormant CVL. Time — 12–15 months total (most post-section 100 reporting). See CVL pillar.

Question 1 — Is the company solvent?

Solvent = assets exceed liabilities AND company can pay debts as they fall due. If yes, go to Question 2. If no, CVL is required.

Question 2 — Are reserves above the MVL threshold (~£25,000)?

If yes, MVL is typically preferred (BADR available, capital treatment, certainty). If no, go to Question 3.

Question 3 — Does the company have outstanding BBL or HMRC arrears?

If yes, even a ‘dormant’ company with these liabilities is technically insolvent — CVL is the correct route. Strike-off invites the 2021 Act investigation. If no, strike-off is the simplest and cheapest route.

Holding company / family vehicle

A company holding investments or property for a family group, no longer needed. Typically solvent. If reserves substantial: MVL. If reserves modest: distribute first, then strike-off.

Failed startup with no remaining assets

Tech / professional services startup that didn’t raise or didn’t reach product-market fit. Typically: no assets remain; possibly small unpaid HMRC or supplier debt; potentially outstanding BBL. CVL if BBL outstanding; strike-off (after creditor settlement) otherwise.

Contractor company that ceased trading

Contractor / consultant company wound down after IR35 reform, retirement, or change of circumstances. If solvent with reserves > £25k: MVL. If solvent with smaller reserves: strike-off after distribution. If insolvent (e.g., DLA position, BBL): CVL.

Group subsidiary no longer trading

Subsidiary in a corporate group that’s no longer needed. Intra-group debts often dominate the balance sheet. Group treasury can typically restructure (capitalise debt, transfer assets) to make the company solvent, then strike off or MVL.

For the MVL vs strike-off detailed comparison, see MVL vs strike-off. For BBL implications, see BBL personal liability. For the CVL procedure where insolvent, see CVL pillar. For one-director dormant companies specifically, see Liquidating a one-director company.