Full source list for I'm closing my business. What do I actually need to do?
Six numbered references for /wayfinder/refs/closing-the-business-properly:
1. Directors' duties on insolvency: section 135 of the Companies Act 1993 prohibits directors from agreeing to the company carrying on business in a manner likely to create a substantial risk of serious loss to the company's creditors. Section 136 prohibits directors from agreeing to incur obligations on behalf of the company unless they reasonably believe the company will be able to perform the obligation when required. Continuing to trade through insolvency creates personal liability exposure for directors.
2. Short-form removal vs solvent liquidation: section 318(1)(d) of the Companies Act 1993 allows the Registrar to remove a company from the register on application by a shareholder authorised by special resolution, the board of directors, or another person specified in the company's constitution. Section 318(2) requires the request to be on the grounds either (a) the company has ceased to carry on business and has discharged its debts in full, or (b) the company has no surplus assets after paying its debts and no creditor has applied for liquidation. Solvent voluntary liquidation under sections 241-289 produces a more formally-final outcome and gives certainty on tax-efficient distribution of retained earnings and capital reserves.
3. IRD clearance for short-form removal: section 318(3) of the Companies Act 1993 requires that a request for removal under section 318(1)(d) be accompanied by a written notice from the Commissioner of Inland Revenue stating that the Commissioner has no objection to the removal. IRD typically issues clearance after final tax returns (income tax, GST, payroll if applicable) are filed and any tax owing is paid.
4. Tax treatment of distributions on liquidation: under the Income Tax Act 2007, distributions of capital and capital reserves to shareholders by a liquidator on solvent liquidation are generally tax-free, provided they are properly structured as capital distributions rather than dividends. Distributions of retained earnings are generally treated as taxable dividends, subject to dividend withholding tax, with imputation credits typically available to offset much of the tax. The tax-efficiency of liquidation distributions is one of the main reasons companies with significant retained earnings opt for solvent liquidation over short-form removal.
5. GST cancellation on cessation: section 52 of the Goods and Services Tax Act 1985 allows a registered person to apply for cancellation when their taxable activity ceases (and in other circumstances where they’re no longer required or eligible to remain registered). Cancellation treats any remaining taxable business assets as supplied at open market value, which can create a final GST liability (deemed supply on cessation/cancellation).
6. Restoration to the register: section 328 of the Companies Act 1993 allows the Registrar to restore a company to the register on application by certain persons, including creditors, where the grounds for removal did not exist or where restoration is otherwise justified. Restoration after short-form removal is administratively straightforward; restoration after formal liquidation requires a High Court application under section 329 and is materially more difficult and expensive. This procedural difficulty is part of why solvent liquidation produces more durable closure than short-form removal.