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Closing down a Limited Company and start trading under a new company.

Closing down a Limited Company and start...

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I suspect this question will open up a hornets nest of contention, with regards to ethics but here we go anyway!

My client is a small limited company (t/over under £150k) and VAT registered in the construction industry. He was taken to court by a prior customer and lost the case owing £3k in damages and legal fees. His financial year has just ended (october) and he has just filed a VAT return (unpaid due Dec). His only creditor is the bank to whom he owes £15,000 on his overdraft. He has approached me to ask whether he would be able to dissolve the company and write off the debts (including the corporation tax due for the year ended and the VAT). He would then look to start up a new limited company and commence trading as before with the slate wiped clean.

Before anyone says it, this is a hardworking chap who doesn't own his own property (only business assets are his work van) and lives a very modest lifestyle. His business has taken a beating in the last couple of years from competitors who massively underquote for work and go bankrupt halfway through. He is not trying to dodge paying his dues (he has always paid corporation tax and VAT for his business and personal tax where applicable), he simply cannot pay his debts.

Please could someone advise whether it would be feasible for him to take this course of action and any potential issues that may arise, with regards to starting up a new limited company. None of the company debts are secured against his personal assets (frankly he has none apart from a modest car).

Thanks in Advance.



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By Tosie
14th Nov 2011 10:44


Pity about the court order because he cannot apply to have the company removed whilst it exists.

It seems, whether we like it or not that people just walk away not file ar or accounts and then companies houses removes the company and nobody seems to care.

I have posted a question below re the use of similar name so I would advise your client to use a completely different name to that of old company.

In short get the new co and wait for a creditor to apply for a winding up order or for companies house to remove the company. the other option is to pay  a liquidator £3-5k but there does not seem to be any point if there are no assets.



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By Homie
to Tosie
23rd Jan 2018 17:44

Well, I think it doesnt really matter what you do or who you screw up in the process.
Here is a question for you:
I know a local company in the building trade who has gone bankrupt owing several hundred thousand pounds. He has now set up a new business WITH EXACTLY THE SAME NAME but in a different area (same company directors, him and his wife) how can he be allowed to do this?
He has had several companies, at the moment i believe he own at least 5 or 6. He is in debt to the tune again of several hundred thousand and recently bought a house for over half a million GBP. Is what he is doing legal? Can he start up again with exactly the same name as the one that went bust owing hundreds of thousands, simply by registering in another county?
I would love to hear your comments on this.
If its legal, im in the wrong trade. No wonder i never make money. I have had the same business for several decades and struggle by year on year.

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to Homie
23rd Jan 2018 17:59

Any particular reason why you are ranting about a comment made 7 years ago?

I know this isn't Twitter but unless you have unknowingly just come out of cryogenic preservation you have little excuse for not starting a new thread.

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to andy.partridge
23rd Jan 2018 18:32

I expect Sift have picked it up as "Trending", haven't they ?

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14th Nov 2011 10:52


I assume there's a personal guarantee on the bank overdraft?  Would be most unusual for a bank not to have one of those in place.



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14th Nov 2011 11:02

Accounts for year just ended

Thank you for your responses.

Wilcoskip, I did ask him if he had provided a directors guarantee on the overdraft and he said no, but I will ask the question again and get him to contact the bank.

Another issue is would I need to complete the accounts for the year ended October this year?



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By bduncan
to Flying Scotsman
14th Nov 2011 12:06

Set up the new comany now and register it for VAT now as if it is done in the wrong order he could be refused VAT registration if his previous company owes HMRC VAT.

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By Monsoon
14th Nov 2011 12:14

Yes it's possible.

As long as there are no personal guarantees, then he can do this.

Putting ethics aside:

Form NewCo (as Tosie says, totally different name to the old company)

Open NewCo bank account

If there are any assets (van, tools etc) sell these to NewCo at a reasonable market value. He will have to transfer the funds to OldCo and use these to distribute to creditors (or, in reality, it will get absorbed by the o/draft).

Start trading in NewCo.

Write to OldCo creditors stating the company is insolvent and has no assets and no funds to appoint a liquidator, and therefore request that they consider petitioning to wind the company up.

Normally, at this point you would file form DS01 3 months after cessation of trade and after that point, CoHo will not ask for any more docuemnts to be filed. As there is a court order, I don't believe you can file DS01 (though check the legislation) and so his obligations as director will remain.

If he resigns as director, then he won't be responsible for not filing the accounts if they never get filed. He will be responsible for all his actions up to the point of registration, including any wrongful trading (which is doesn't sound like is the case).

I would also write up minutes of the meeting explaining exactly why he wants to leave/close the company (circumstances make it unviable etc) which show commercial / personal reasons as opposed to "I want to ditch the debt."

If the company is not insolvent, it's still possible to walk away but I don't know whether it would attract further scrutiny.


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14th Nov 2011 14:15

how much are we talking about here

and cant the damages be carried back to an earlier year for CT?

in toto how much is on the line?


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14th Nov 2011 15:09


might it be , or rather might HMRC regard it as so

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14th Nov 2011 20:10


Legal case £3k, VAT £2k, Bank overdraft £15k, corporation tax (haven't done the accounts but likely to be in the region of) £3k

Might be worth paying the VAT in that case.

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16th Nov 2011 14:33

If he can't make the company profitable enough to pay his debts, surely the same will happen to him as a sole-trader?

In a year or two will he be owing money to the Revenue/VAT in the same manner?

I do not see how he can change his ways to make money self-employed when he can't do the same to trade out of the company problem.

And if he can, tell him to trade it through the company and clear his debts!

I wonder how many companies like this it takes to depress an economy and cause a recession? 10, 100, 1,000?

The knock on effect every time a company/trader does this is cumulative and we all suffer as a consequence.

To my way of thinking all this is doing is postponing another round of debt and problems.



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By chatman
to justsotax
16th Nov 2011 14:57

Causing a recession?

Bob Long wrote:
I wonder how many companies like this it takes to depress an economy and cause a recession? 10, 100, 1,000?

Maybe he is just putting more into the economy than he is taking out.

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16th Nov 2011 15:06

it appears that the bank o/d

is unsecured , if that is the case then dissolving / winding it up maybe a good idea - is teh 3k a tippimg poimt in your view - your client is damned if he does and damned if he doesnt!  go for the pass of least resistance

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By Tosie
16th Nov 2011 15:34

Bob Long

The size of the debt makes it impossible for him to trade out of it. In a new company he will be aware of  the competition before he digs too big  a hole.

Surely it is better that he has another go rather than go for unemployment and housing benefit.

He will be paying vat and ct.


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By Monsoon
16th Nov 2011 15:39

@ Bob Long

If he can't make the company profitable enough to pay his debts, surely the same will happen to him as a sole-trader?


Not necessarily. Just because someone haas a failed business once, doesn't mean they will do it again and again. A lot of successful business people have been bankrupt before.

Limited liability (and bankruptcy) gives people the opportunity to start over and get it right next time. Sure, not everyone does, but a lot of people learn from insolvency/bankruptcy and go on to get it right and then be more productive and contribute to society more. That's why it's an option, as opposed to having to live with your mistakes (or misfortune) forever.

Phoenixing has its place in the right circumstances.

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By nasirs
16th Nov 2011 20:15

You should file the accounts for the year ending October as it is classed under the duties of the director, by not fulfilling those could potentially result him being personally responsible for the company debts. Have you looked into a payment plan with the bank and all the other creditors including HMRC, that might prove worthwhile instead of going through the new company route. However I totally understand the troubles as I have seen one of my client going through the same problems. However the only reason of getting into the similar troubles was poor internal controls of the company.

If nothing works out than the best coarse of action is to write to all the creditors and inform them that he will be unable to pay the debts. They will then either liquidate the company on their own cost or just write off the debts. Alternatively you can offer them a payment plan spread over 5 years and they will likely to accept it considering the cost of liquidation with nothing to get in return.

Also advice him to involve you more into his day to day running of finances as this problem only incurred due to lack of control and nothing else considering the company was profitable.

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17th Nov 2011 10:22

cease trading

If the company is unable to pay its debts when they fall due it is insolvent !!!...and the appropriate action is to cease trading immediately and to appoint a liquidator,...likely they will not be interested (as no assets) so advise all creditors , companies house and HMRC that the company is insolvent, no funds to pay a liquidator and invite them to make a formal winding up one will... you can then just leave co in limbo.....and start up again................There are plenty out there that do this deliberately and get away with it time and time again......................

May be your chap has not done this deliberately and would be better off just getting a job rather than running a business.....a job on the council pays a very good pension I hear with generous benefits, holiday and sick pay entitlement ! being the one paying for it !

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By dwgw
17th Nov 2011 12:10

Lots of options for the "hard working chap" but ...

... not much hope for the prior customer and their damages. 

Reinstating the ethics and putting the practical application of the law aside for once, I can't help wondering whether the customer can afford not to recover his damages and costs.  Is he having to pay someone else to correct bad work?  Maybe he's a hard pressed pensioner, maybe he's just lost his job and has a family to support.  Who knows?

I know your client can start again (and should be able to, within reason) but perhaps he doesn't deserve the benefit of limited liability protection a second time.  His aggrieved customer's slate isn't wiped clean - how would we feel in that position? 





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By Monsoon
17th Nov 2011 12:37

Morals and ethics

People are talking about ethics, but perhaps we mean morals? I know, it's semantics, but when I hear 'ethics' I think of professional ethics. These are to act within the law and to offer correct service to our clients. Morals are personal and vary from individual to individual. Complex tax avoidance schemes are arguably immoral - depending on your personal morals. Legally, we have the right ot arrange our tax affairs in any legal way we choose in order to pay a lower amount of tax. As professional advisors, we are supposed to be objective and impartial and lay out the facts and the options.

I happen to agree with the Black Knight here. The insolvency rules are there for a reason.

If someone comes to me and says they are in a mess, haven't filed tax returns for 5 years, want to get things up to date and pay their tax, they have some saved up... we say yes, sure, of course we can help. If someone comes to me and says they are in a mess, can't pay their tax, can't sleep at night and really want some professional help - by the same token we ought to say yes. Unless I think they've been dishonest, I usually will. Sometimes the right answer is insolvency.


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By dwgw
17th Nov 2011 12:42

I'm inclined to agree that, assuming you're satisfied your client isn't a complete rogue and you can act for him with a clear conscience, then your role is to give best advice, awkward though that may be.

"Moral high ground" is always used in a pejorative sense but it shouldn't be an easy get out for those seeking to avoid any ethical responsibility (which I'm not suggesting is the case here).

Perhaps I'd side with the builder against his customer if I knew the facts, perhaps not.

The rules are as they are but it is still very much our place to apply ethics.  That's not moving the goal posts, it should be at the core of any professional's actions.  If we can then honestly see no reason not to continue acting, then we should carry on.  Otherwise, we should refuse to act.  Ethics aren't something to be afforded or not, they must be absolute if this or any other profession is to have any integrity.

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17th Nov 2011 13:41

@monsoon - spot on regarding people failing at business.


We have such an unforgiving attitude in this country with people who fail at business. We tend to personalise the whole thing as though something is inherently wrong with the person who failed.


This attitude is completely opposite in the states where failing in business is seen as a positive thing as you have gained the lessons and experiences needed to, hopefully, succeed second time around.

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17th Nov 2011 14:16

They do

Seem to learn at everyone elses expense...we all contribute to the unpaid tax and some take the knock first hand....which puts their business in trouble....

Personally...I think it is a little to easy to walk away unscathed and do the same again... some of these unfortunate souls never took any advice and still managed to afford their holidays !! Where as others opt to pay their tax bill first before booking the holiday.

I think in general everyone needs to take a bit more responsibility for their actions.

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17th Nov 2011 19:58

The Facts re the legal case

I did ask my client about the legal case directly. Not because I wanted to make my own moral judgement, but because I felt as his advisor it might be important for me to know what was going on.

The version of events that my client presented was that he had fitted a floor for a customer in London (not a penniless pensioner but someone who could afford an oak floor at several thousand pounds - not that it's relevant but just to put everyone's mind at rest). The customer called my client several months later concerned that the floor had started to buckle. My client went to visit his house to check the condition for himself at his own expense and advised his customer that this kind of damage might be caused by washing the floor with water, which he should not do. He also advised him that the supplier that had provided the wooden flooring provided a generous guarantee/warranty on the flooring so if necessary they could arrange a replacement. Presumably feeling fobbed off the customer decided to take it apon himself to bring in another guy to replace the flooring and the legal case was the customer trying to reclaim the cost of having the flooring replaced.

Feel free to make your own judgement as you see fit. Having acted an accountant for my client for the past 3 years I believe him to be of good and honest character and this is the only instance of this nature I have encountered with him.

@Bob Long I think you should read my original post. He is a limited company and looking to close it down to start a new limited company. He has traded for well over a decade and paid every penny of corporation tax, personal tax and VAT due. His businesses has provided work for several local subcontractors and kept both him and his wife from being required to claim jobseekers allowance as I doubt at his stage of life he would be able to find employment in the construction industry. Just because we are in the midst of an economic crisis does not mean we can assume that everyone who struggling financially is looking to take the proverbial.

The £3k legal case was unfortunately the straw that broke the camel's back and when he originally approached me he was on his way to the bank so see if he could arrange to repay the overdraft in full over the course of several months/years as he was looking to wind up the company.

Many thanks to all that have provided advice and helpful comments.




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18th Nov 2011 08:40

teentsy idea



it's worth changing name of old co. now if it's doomed so it does not appear in index with the name that possible customers are familiar with. e.g. z byebye limited.

this might give you an easier time trading with a similar name to old one.

also he has to be careful about any agreements in name of old co e.g telephone/internet/transit hp agreement etc...


it's extraordinary - a builder going pop, wonders will never cease.




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18th Nov 2011 09:10

Not so strange up North

There are the good guys and bad guys in building!

The building contractors (and many subcontractors) we have as clients are all being squeezed and many are working for a pittance!

They are just hanging on, working for little, or no profit, in the hope they don't have to lay off their experienced workers, and hoping better times are around the corner. In any case, the main contractors are setting such tight deadlines that anyone reducing their work force would risk not completing the contract in time and then they would suffer penalties!

We suspect that many main contractors are taking advantage of the lack of work, and are raking it in. Tenders are non-existent. They now dicatate what they are willing to pay, and many have extended their payment terms to 60 days.

It just needs one of these main contractors to cut and run with the money and the pack of cards will all fall down!

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By dwgw
18th Nov 2011 12:51

Sir Digby - thanks for the interesting back story on the legal case.  Very interesting how the perspective can change!  I would have asked too - partly out of interest (or nosiness) and partly in case it presented any ethical concerns.

As an aside, we had an oak floor installed and were advised not to go for solid oak because of the buckling problem, which I gather is a natural process.  Engineered oak is less likely to buckle - it's a thinner layer of oak on top of a manufactured board but a much more reliable surface.  Wouldn't dream of cleaning either type with water.

I hope your client manages to salvage his business, one way or another. 

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18th Nov 2011 14:47

just go ahead with the dissoloution

shit[***][***] happens or in the case of the door shut happens - if its not closed close it now and move on with new company

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12th Mar 2013 17:40

Interesting insight
What a fascinating string, I am not an accountant but a business owner and what an insight it is reading through the comments. There are a obviously some accountants out there that really understand the pressures that the current state of the economy exerts on their clients, but some that have no idea at all. In fact some seem to despise any client who fails or does not keep perfect accounts. The idea that because you have a failed business means you should be punished Is ridiculous, make it much harder to run or start a business in this country and less will be started, less business's being started means less accounting revenue. Running a business is something you get better at and the more you learn, like anything, the better you get, even accounting. Should we stop an accountant practising because he made a mistake on some ones accounts?
There are crooks out there but the majority of business owners are just trying to get on and in the process they put their security on the line as well a suffering endless sleep less nights

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15th Dec 2015 20:14

Re: Company dissolution and buy back
My client a 50/50 shareholder and co-director of a limited company set up with a friend in England. The company was originally set up in June 2013 to offer money transfer business but despite having a license from Financial Conduct Authority (FCA) could not obtain high street bank account to do so. They decided to offer instead agency work for leading money transfer companies and other related services. The company is not heading in the right direction and there are clashes between them. My client co-director informed him that he would like to leave the company but want a payout of £50,000.00 or they close down the company. My client informed the co-director that the company don't have that money to buy him out. My client requested that the co-director buys him out of £25000.00 and he would leave the business for him but have received no response. They hired a consultant to sell the business and the license as a going concern without success. They have each contributed £25,000.00 towards rent and other expenses (director’s loan or director’s current account). .Apart from the financial investment, my client have contributed more to the business in terms of time, introduction of services and use of personal assets. The business is 2 years and three months into a leasehold agreement. My client can see prospects for the business in few months time but the co-director is not convinced. My client would like to continue with the same name or set up completely new company to carry on the existing business in the same premises. He has informed the agencies and suppliers and have assured him that they would like to carry on business with him once they break-up. They have no "contract" or "partnership agreement" in place. The company does not have overdraft or business loan. The company has no assets. There is no profitable track record or goodwill except Money Business Services license which is not even of any value without a high street bank account. If they close down the company would they would lose the Financial Conduct Authority (FCA) license which cost them lot of money to obtain. The company was set up by a company formation agent. My client has advertised the name extensively and is building a healthy client base. He told his co-director resign as a director but there is no sign of him doing so without a pay-off even though he is desperate to leave for health and financial reasons. I have not handled such a situation before.

My questions are:

1. Can my clien set up a new company on 31 December 2015 and start trading with the new name and at the same premises from 1 January 2016?
2. If they dissolve the company can my client buy it back later as a former director and transfer the old company to the new one and retain the combined financial investment to date of £50,000.00?
3. If they dissolve the companyy and my client buy it back in 3 months time can get the FCA license transferred to the new company or has to apply again?
4. Can my client continue the new business in the leasehold property until the term of the lease expires or he has to re-negotiate a new lease agreement with the landlord?
5. How can the business be valued to determine what is due to both as a pay-off?
6. Do they have to prepare a set of accounts to know the position?

Thank you very much.

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