My Company has Failed: From Winding Up to Bouncing Back
There may come a time when your circumstances change and you're no longer able to run your company. Nobody expects something like that to happen when they start a company but it can, and does. There are many reasons why a company can fail including unforseen competition, added complications or even a change in personal circumstances, to name a few.
With 25% of new businesses failing in the first year and 55% failing by year 51, there's a good chance that you're not alone if you're feeling as though your company is going nowhere. But this doesn't mean you should never own or run a company.
How Do I Legally Close My Failed Company?
Before you can set up a new company you'll need to shut down your failed one. This process is called dissolution. There are several different forms this can take, depending on the reason why the company is closing. Due to this post being written about you wanting to wind up the company, rather than being forced to because of debts, the next section will focus on that. If you want more information about the different types of liquidation then check out our previous post I'm Scared of Liquidation - Should I be?".
If the company is still solvent (able to pay its bills) then you can strike the company off the Register of Companies through Companies House. There are conditions to this though2:
- Your company has paid all its debts
- Your company hasn't traded in the last 3 months
- Your company hasn't changed its name in the last 3 months
- Your company isn't under the threat of liquidation
- Your company doesn't have any agreements in place with its creditors.
- Your company hasn't engaged in any other activity except where it is necessary for:
- making an application for striking off
- concluding the affairs of the company
- complying with any statutory requirement
If your company meets all of these requirements, then you are able to strike off the company.
The directors must complete the Form DS01 and deliver it to Companies House. Within one week of filling in this form, the directors must ensure that all parties with a vested interest in the company have been informed of the decision, and have received copies of the application.
As long as there are no objections, Companies House will strike off the company within 3 months.
How do I come up with my next business idea?
After shutting down the failed company you can concentrate on where to go next.
But don't rush into this head first, take your time. Assess what went wrong with your old company, as well as what went right. Put a list together and try and connect the dots by asking why that particular thing didn't work. You can then use this list to steer your business idea forward and what areas you can try and replicate in the future.
Next you'll need to think about what type of business you want to start. It may be similar to your old company, or it may be something completely new. If you're unsure about what to do then you could start by compiling some ideas. This could be a new innovation or a company based on a current start-up idea. A useful way to go forward is to think about the industries you are interested in and others you're not so keen on. Then, from your interested in" list learn more about the trends within that industry and see if you can capitalise on any of them.
If you're still stuck for ideas then think about the products or services that you use in your everyday life. Are any of them substandard or could be improved on? This could be a good place for you to start.
Once you've come up with your idea, you'll need to conduct extensive research into the area. This includes: market research, writing a business plan, thinking about financing, to name a few.
Registering your new company
Once you've thought of your new business idea, carried out the research and found that it's viable, it's time to register the company. You've already had experience of this, but for a quick reminder of the process and what you'll need continue reading.
- A company name
- There are rules in place about this3, but there is room to be creative. Also, you can use the name of your previously dissolved company if you're really stuck for ideas.
- A registered office in England and Wales, Scotland or Northern Ireland
- This can be anywhere within the jurisdiction, so long as it's a real address and not a P.O. box
- A company director
- You can have more than one director if you choose to.
- A shareholder or guarantor (depending on the type of company you opt for)
- This can be the same person as the director
- A memorandum and articles of association
- These are the founding documents of the company
- Share capital of at least one share
- This only applies to companies limited by shares
- A SIC code
- This is a code used by Companies House to identify the industry you are operating in. For more information, check out What are SIC codes?
Failure will probably happen at some point, but it's how you deal with that failure that will set you up for future successes. They can teach you things you would never have thought of and so can help you to realise ways in which you can move forward. Put your failure behind you, learn from your mistakes and move on with your new company.
1. Source: Statistic Brain - Startup Business Failure Rate By Industry. Research conducted: May 2017
2. Source: GOV.UK - Strike off, dissolution and restoration - Section 3: When a company cannot apply to be struck off the register
3. For a full list of rules check out the GOV.UK advice for choosing a company name