When a company’s management wish to have the company brought to an end, a two-step process follows where the company is struck off the register at Companies House and concurrently dissolved.
It is important to note that dissolution and striking off is not a valid means of escaping company creditors, who can apply to have the company restored in order to pursue their claims. There are stringent notification requirements and other procedural requirements that directors must follow in order to avoid sanction.
Procedure for striking off and dissolution
Upon approval by a majority of the company’s directors, an application for striking off and dissolution can be made for a nominal fee. A specific form – DS01 – must be signed and dated by the voting majority of directors.
Where striking off is in contemplation, a company must perform diligence in identifying any parties who might have an interest in the company and could potentially move to prevent the striking off. Once identified, the parties must be notified within seven days of the making of an application. These include HMRC, creditors, banks, employees, landlords and tenants, and other government agencies. If a new director is appointed, or employees hired, after an application but before striking off occurs, they must also be notified within seven days of appointment or hiring.
Exceptions to striking off
Under the Companies Act 2006, a company cannot be struck off if within the three months prior to the application the company has:
- changed its name;
- traded or carried on business.
A company cannot be struck off if at the time it is subject to insolvency proceedings or a creditors’ agreement.
Permissible activity that will not prevent striking off includes:
- winding up the company’s affairs, including settlement of debt;
- procuring professional advice with regards the striking off process;
- selling off business property or rights that were previously used in the course of business preceding the striking off; and
- measures pursuant to statutory compliance.
Assets of the company and striking off
Prior to striking off, it is important to ensure that bank accounts are closed and assets are sold off. Upon dissolution, any credit or assets still remaining will vest in the Crown.
Public announcement and completion of striking off
Upon receipt of an application form for striking off, the proposed striking off will be announced by notice in the London Gazette in order to afford outstanding interest parties the chance to object. If no such objection is made, the company will usually be struck off the register at least two months after posting of notice. It is advisable to ensure that objections are received by the registrar two weeks before the end of the two-month grace period.
Basis for objections
An interested party may base their objection on statutory grounds laid out in the Companies Act 2006. These include where the applicant company has failed to comply with procedural requirements, resumed trading or that the company is subject to insolvency proceedings, that the directors failed to inform that to other interested parties, and where fraud or misrepresentation has been committed.
Withdrawing an application for striking off
If a company applies for striking off but pending approval it becomes ineligible based on the abovementioned grounds, it must seek withdrawal of the application.
Failure to adhere to statutory requirements
Where a company fails to adhere to the abovementioned eligibility grounds or time limits, its directors may be subject to criminal sanction and disqualification from directorship for up to 15 years.
Striking off on initiative of the registrar
If the registrar has reasonable cause to believe that a company is not carrying on business, they may under their own volition strike off the company.
Before proceeding on these grounds, the registrar must issue two formal letters to the company’s registered office enquiring whether the company is continuing its business. If no adequate response is received, the registrar will post a notice in the Gazette offering the chance for interested parties to object. If no such objection is received, the registrar will proceed to strike off the company at least two months after posting of notice.
Restoration of the company
After being struck off and dissolved, interested parties can apply to court to have the company restored. The effect of restoration is to bring the company back into existence as if the striking off had never occurred. Certain time limits apply depending under what statutory regime the company was dissolved.
If the company was dissolved on or after 1 October 2009 on grounds of initiative by the registrar or on application by the company directors, restoration can be sought up to six years following initial dissolution.
If the company was dissolved pursuant to voluntary winding up on insolvency or other form of liquidation on or after 1 October 2007, restoration can be sought up to six years following dissolution.
For personal injury claims against the company, there are no applicable time limits for restoration.
Costs of restoration and penalties
If a company leaves assets that vest in the Crown, a court may direct an interested party seeking restoration of the company and its assets to pay the costs for restoration. If a company owed late filing fees with Companies House prior to initial dissolution, these will also be required to be paid upon restoration.
Contact our Dissolution, Strike Off and Restoration Solicitors Mayfair and throughout London
Bringing a company to an end requires meticulous attention to what debts and liabilities owed and to which interested parties who might object to the company being struck off.
The Insolvency Solicitors at Lewis Nedas have served a wide range of clients with their financial affairs during difficult times, including directors in insolvency and stakeholders such as banks, sponsors and landlords. We have provided expert advice on salvaging company prospects, including reorganising and restructuring of debts.
For further information or to speak to our expert Corporate Recovery & Insolvency Lawyers please contact us on 020 3811 6792 or complete our online enquiry form.