Overview: closing a business

There are many issues facing a business owner who is considering or facing a business closure or transfer. This document aims to provide you with general information on these issues and links to more detailed information to help guide you through this process.

I am a sole trader. What do I need to do when closing my business?

If you are a sole trader the process is quite straightforward. You simply cease trading and inform your clients and suppliers that you are no longer in business. You need to retain financial and other records for 6 years following closure.

If you use a business name you must inform the Companies Registration Office that you have ceased trading within 3 months. You do this using Form RBN3.

You can cancel your tax and VAT registration with Revenue by filling out a Tax Registration Cancellation Notification (form TRCN1)(pdf).

If you owe debts to creditors you are personally responsible for those debts. Read more about debt issues and self-employed people.

My business is incorporated as a company. How do I close it?

You may wish to close your business by means of voluntary liquidation because you are retiring or for another personal reason. Liquidation is the process of winding up a company so that it no longer exists by using its assets to pay its debts. A liquidator is the person appointed to wind up the company and whose principal function is to dispose of the company’s assets, pay or settle its debts and distribute any surplus to its members. When a company is in liquidation, the liquidator usually takes over the powers of the directors. There are 2 types of voluntary liquidation:

• Members’ voluntary liquidation: This is when the members of a company that can pay its debts decide to wind it up. Part of this process is that a majority of the business directors must make a declaration of solvency. This declaration means that they have enquired into the affairs of the company and believe that it would be able to pay its debts within a certain period.
• Creditors’ voluntary liquidation: This is when a company is unable to pay its debts when they are due. Sometimes this happens when a members’ voluntary liquidation is converted into a creditors’ voluntary liquidation. In other cases, it is when the members of a company decide that the company’s debts are such that it should be dissolved as a creditors’ voluntary liquidation.

What if my company is in involuntary liquidation?

Involutary liquidation means that a company is wound up by the court. This happens mainly at the initiation of any member or creditor of the company. In some circumstances, it can happen by order of the Minister for Jobs, Enterprise and Innovation. The court appoints the liquidator and supervises the liquidation process.

A receiver may be appointed by the court or when a loan agreement is being enforced. The receiver is appointed to take control of the assets of the company which have been used to secure a loan, such as a mortgage. Where a loan is secured on certain company assets the receiver sells these assets on behalf of the lender.

If a company goes into examinership, it means that the company's financial health is ailing, but that the company is still potentially viable. An examiner is a person appointed to a company by the Court to assess the company’s position and prepare a rescue plan for the company.

You can find more information in the booklets published by the Office of the Director of Corporate Enforcement.

What happens to employees when a business is closed?

When a business is closed/transferred, the law protects the rights of employees in these circumstances.

If you no longer require the services of some of your employees (because you are in financial difficulties or you are reorganising your firm) you may need to make them redundant. The definition of redundancy is where a job no longer exists and the person is not replaced. You must ensure that fair procedures are followed during what is likely to be a very difficult and stressful time for your staff. In selecting a particular employee for redundancy, you should apply selection criteria that are reasonable and are applied in a fair manner.

Your employees may be entitled to bring a claim for unfair dismissal if they consider that they were unfairly selected for redundancy or consider that a genuine redundancy situation did not exist. Examples of these situations might include where the custom and practice in your workplace has been last in, first out and your selection did not follow this procedure. Fair procedures also include giving employees at least 2 weeks’ notice and many employees may be entitled to more notice. You must also pay the redundancy payment due to the employee on the date of dismissal.

What is the Redundancy Payments Scheme?

All eligible employees are entitled to a statutory redundancy payment when they are made redundant. If you pay the statutory redundancy entitlement and give proper notice of redundancy to your employees you are entitled to a 15% rebate* from the Social Insurance Fund (SIF). If you cannot pay the entire 100% then payment in full will be made out of the SIF and you will then be liable for 85% of the payment (as a preferential creditor to the Department of Social Protection). To apply for a rebate you should apply online using Form RP50 which is also the form used to give notice to the employee.

* The employer rebate of statutory redundancy payments to employees made redundant on or after 1 January 2012 is 15%.