Can I close a limited company with debts? (and how to do it)
- adambrassington85
- 2 days ago
- 3 min read
Updated: 14 hours ago
Summary: Yes, you can close a limited company with debts and start again, but only if you follow the correct legal process and appoint an insolvency practitioner (IP).
If the company is insolvent, you must use a formal insolvency procedure such as a Creditors’ Voluntary Liquidation (CVL). Directors can usually start a new company afterwards, provided they haven’t acted fraudulently or wrongfully. This guide explains everything you need to know about closing a limited company with debts and how to do it.
Can You Close a Limited Company With Debts?
Yes, but the method depends on whether the company is insolvent or still able to pay some debts.
If the company is insolvent (cannot pay its debts) - you need a formal liquidation, usually a CVL, handled by a licensed insolvency practitioner.
If the company is solvent (can pay its debts) - you can close it using a Members’ Voluntary Liquidation (MVL) or a voluntary strike‑off.
Can You Start a New Company After Closing One With Debts?
Yes, in most cases, directors are free to start a new company immediately after liquidation. However, there are rules:
You can start again if:
You acted responsibly as a director
You didn’t take deposits you knew you couldn’t fulfil
You didn’t continue trading while insolvent
You cooperate with the liquidator
You cannot start again if:
You are disqualified as a director
You committed fraud or wrongful trading
You misuse the old company name
How to Close a Limited Company With Debts (Step‑by‑Step)
1. Stop trading immediately
Continuing to trade while insolvent can lead to personal liability.
2. Speak to a licensed insolvency practitioner
They will assess whether CVL, administration, or another route is best.
3. Enter a Creditors’ Voluntary Liquidation (CVL)
This is the most common route for insolvent companies. A CVL will:
Legally close the company
Write off unsecured debts
Stop creditor pressure
Allow directors to start again (if compliant)
4. The liquidator sells assets and deals with creditors
You no longer manage the company — the liquidator does.
5. The company is dissolved and debts cleared
Once dissolved, the company no longer exists and debts die with it (unless personally guaranteed).
What Happens to the Company Debts?
Unsecured debts
These are written off when the company is liquidated.
Secured debts
Lenders may repossess assets tied to the loan.
Personal guarantees
If you signed one, you remain personally liable.
Bounce Back Loans
Written off in liquidation, unless fraud is found.
Can I Close a Company with Debts to HMRC?
Yes — HMRC debts are written off when a company enters a Creditors’ Voluntary Liquidation (CVL). HMRC becomes an unsecured creditor, meaning they receive a share of any asset sale, but the remaining balance is wiped when the company is dissolved.
HMRC will not chase you personally unless:
You committed fraud (e.g., deliberately not paying VAT)
You continued trading while insolvent
You misused PAYE/VAT money
You took deposits knowing they couldn’t be fulfilled
Most directors who acted reasonably face no personal liability for HMRC debts.
Can Directors Be Held Personally Liable For Company Debts?
Most directors who acted reasonably face no personal penalties. Only in specific situations can personal liability arise, such as:
Wrongful trading
Fraudulent trading
Misuse of company funds
Unpaid PAYE/VAT due to misconduct
Personal guarantees
Can I Start a New Company After Liquidation?
Yes — and many directors do. It’s legal, common, and often the best way to move forward.
You can start a new company if:
You follow the liquidation process correctly
You don’t reuse the old name without permission
You weren’t disqualified
How to Start a New Company After Liquidation
1. Choose a new company name
Avoid anything too similar unless you follow the phoenix rules.
2. Register the new company with Companies House
This can be done online in minutes.
3. Set up proper financial controls
To avoid repeating past issues.
4. Avoid personal guarantees where possible
Negotiate alternatives with lenders.
We're Here To Help You Close Your Company and Clear Your Debts
We offer a free, no obligation insolvency consultation with one of our qualified insolvency practitioners (IPs). We aim to first understand your circumstances so that we can provide you with a clear path to close your company and clear its debts. If you choose to go ahead, we offer one of the quickest and lowest cost liquidation services available.
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