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The Impact of Brexit on UK Company Dissolution

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The decision for the UK to leave the European Union in 2016, commonly referred to as Brexit, has had wide-ranging impacts across many aspects of business and the economy. One area that has seen significant changes is the dissolution of UK companies. Company dissolution refers to the formal process of closing down a business and removing it from the Companies House register.

Since Brexit, dissolving a UK company has become more complex in a number of ways:

Cross-Border Complexities

Prior to Brexit, dissolving a company with connections to EU countries was relatively straightforward. UK companies could easily own assets or conduct business activities in other EU nations. However, after leaving the EU single market and customs union, moving money, goods or services across borders is no longer frictionless. This means companies with EU ties must navigate extra red tape when winding down cross-border operations.

For example, a UK company with a subsidiary in France would need to liquidate the assets separately under French law. The UK directors would also need to close the French bank account and handle employee terminations per French regulations. This dissolution process for the EU portion can be lengthy and expensive.

Changes to UK Corporate Law

While still largely aligned, UK company law has diverged from EU standards since Brexit. This means directors dissolving a business must be careful to follow the latest domestic regulations, which may differ from previous EU-wide legislation.

Areas like insolvency proceedings, creditor hierarchies and director liabilities have seen tweaks to the UK legal framework. Business owners need to seek professional advice to dissolve in full compliance. Non-compliance can lead to harsh penalties.

Trade Barriers & Supply Chain Issues

UK companies with EU supplier relationships or customer bases have faced major hurdles post-Brexit. Trade barriers like customs checks and rules of origin requirements make importing and exporting far more difficult. This has caused supply chain problems for UK companies trying to wind down operations reliant on EU trade.

Directors attempting to dissolve must navigate issues like: returning leased equipment to EU suppliers, selling inventory back to EU vendors, handling warranties for EU customers, and collecting outstanding payments from EU clients. New trade friction makes these processes slower and costlier.

Currency Fluctuations & Red Tape

The Brexit vote triggered major currency fluctuations between the British Pound and Euro. This exposed UK companies to foreign exchange risks when trying to dissolve aspects tied to Europe. Transferring money or assets between the UK and EU became less predictable.

Added bureaucracy like customs declarations also drove up administrative costs for UK companies dissolving cross-border components. Professional legal, tax and accounting help became more essential to handle the added layers of red tape.

Limited Access to EU Talent

Freedom of movement between the UK and EU ended after Brexit. This restricted hiring EU nationals to help handle specialised dissolution tasks like overseas asset liquidation, foreign subsidiary closures, and navigating EU legal/tax technicalities. UK companies previously relied on EU talent for expansion into Europe, as well as efficient dissolution.

Loss of EU Funding & Investment

Thousands of UK companies benefitted from EU funding, grants and investment over the years. These sources dried up after Brexit. Some companies relying on ongoing EU funding to stay solvent had no choice but dissolve earlier than planned after Brexit. This included startups, non-profits focused on EU programs, and researchers needing EU grants.

For UK companies that were mid-dissolution when Brexit hit, the sudden loss of expected EU investment caused major problems. It forced directors to implement quicker, less optimal dissolution plans.

New Barriers to Re-Establishment

Previously UK companies could seamlessly re-establish themselves or transfer assets into a new EU jurisdiction after dissolving their UK entity. However, Brexit erected new barriers to UK companies wanting to re-establish in the EU post-dissolution.

UK companies now face more regulatory burdens, potential tax implications, higher setup costs and other hurdles when trying to restart operations in the EU. Directors must factor this into their dissolution and re-establishment strategies.

In summary, the impacts of Brexit have been wide-ranging and complex when it comes to dissolving a UK company with any EU ties. Business owners need expert guidance to successfully wind down cross-border operations, remain compliant, minimise tax liabilities, and overcome new barriers when re-establishing in the EU. While the post-Brexit landscape remains filled with uncertainties, with careful planning UK companies can still achieve orderly and efficient dissolutions.

Contact Future Strategy today to learn how we can help you dissolve your company in a compliant and professional manner.

We can talk you through all of your options and find you the right solution

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