Companies are people’s dreams. Sometimes, a company becomes the only source of livelihood. Most of the time, people treat and think of their companies as the staircases that go up to the peak of great success.
But do you know that this dream and desired company could eventually become an obstacle for you? You may get tired, bored, or detached from your once-loved company. Means of success could hold you back and become a roadblock for growth. That’s when it becomes mandatory to close the company. This is when the voluntary strike-off comes into play.
Today, let’s talk about a voluntary strike-off and why and how it becomes mandatory for a company.
Strike Off Company Meaning
Striking off a company is the process of officially removing a registered company from the Companies House register. This procedure effectively dissolves the company. Striking off means the company stops being recognized as a legal entity.
The exact steps to strike off a company might differ from country to country, but generally, it involves winding down operations, settling any debts and obligations, and finally taking the company off the active business register.
A company strike-off could occur because:
- The company has ceased operations.
- The director is nearing retirement.
- The directors simply do not want to continue running the business.
In the UK, striking off a company is a quite complex process that requires several legal and financial implications. So, before deciding anything concerning that, it’s important to understand the process and the consequences before making a decision.
Types of Company Strike Off
A company strike-off, sometimes called dissolving a company, removes a limited company from the Companies House register.
It no longer exists once the company name is removed from the register.
There are two types of company strikes:
1. Voluntary Strike Off
When the board of directors of a company agrees it’s time to close down the company, they can choose to voluntarily dissolve or strike off it. However, legally speaking, they can only do this if the company has no outstanding debts and is financially stable.
2. Compulsory Strike Off
Compulsory strike-offs occur when Companies House requests to remove a limited company from the register. It’s important to remember that only companies without outstanding debts can be dissolved. All financial obligations need to be cleared before the dissolution can go through.
Voluntary Strike Off Companies House
As we mentioned earlier, Voluntary strike off refers to the process by which a limited company or Limited Liability Partnership can be removed from the UK Companies House register. This happens at the request of the company’s directors, shareholders, or members.
By striking off, the company is no longer in existence, and you are no longer required to send Companies House any additional information, such as annual accounts and confirmation statements.
Before a voluntary strike off can begin, the company must meet certain conditions. You can apply to strike off your company from the Companies House register voluntarily, but only if:
- The company has not traded or changed names in the last 3 months.
- The company is not threatened with liquidation.
- There are no agreements with creditors, such as a Company Voluntary Arrangement (CVA).
If your company does not meet the abovementioned requirements, you must voluntarily go through the strike off process.
First Gazette Notice for Voluntary Strike-Off
A First Gazette Notice is a public notice printed in the Gazette, a public publication promoting statutory notices. According to the notice, a private limited company or limited liability partnership has applied to Companies House to be struck off the register.
The following details will be included in the notice:
- The company’s name.
- The registration number of the company.
- The publication date of the notice.
- The date when the company will be officially struck off.
Companies House publishes First Gazette Notices for Voluntary Strike Off to give anyone interested in objecting to the strike-off an opportunity. Creditors, shareholders, and other interested parties may file objections.
If Companies House receives no objections within the specified period, they will publish a Second or Final Gazette Notice. The Second Gazette Notice will confirm that the company or limited partnership is struck off the register and is no longer an active entity.
Once a limited company has been struck off the register, it will no longer be able to trade, and its assets will be passed to the Crown.
You must provide evidence to support your objection, such as invoices or other documentation proving the company owes you money.
If you are a director, you can withdraw your company’s application to be struck off.
Why Would a Company Voluntarily Strike Off?
The company’s directors apply for a voluntary strike off when they no longer want to run the business. This could happen for several reasons, which are not limited to the following:
- Cease Operations: The company is no longer in operation or has become dormant, and the owners no longer wish to keep it that way.
- Simplifying: The owners want to simplify their business structure or reduce administrative and compliance burdens.
- Cost Savings: Maintaining a registered company includes filing fees and financial reporting expenses. And dissolving the company can save money.
- Ownership Changes: Ownership or management changes may result in a decision to close the company, particularly if it no longer aligns with the new owners’ goals.
- End of Project: The company was established for a specific project or purpose that has been completed, making it unnecessary to continue.
- Strategic Restructuring: The voluntary strike off could happen as part of a larger business restructuring or reorganization strategy.
- Avoiding Ongoing Obligations: Avoiding the need to keep up with statutory filings and reporting requirements, such as annual accounts and the Confirmation Statement—could lead to a voluntary strike off.
- Personal Choice: The owners may close the company for personal or strategic reasons.
- Unprofitability: Applying for a voluntary strike off the company may make sense if a limited company is not profitable and cannot expand successfully.
- Retirement of the Directors: If no obvious successor can be found within the family or among the current management group, there may not be much of a choice but to apply for a voluntary strike off the limited company.
- Conflict Between Directors: Disagreements between company directors and shareholders are prevalent. But if it becomes serious, striking off the company may be the only option.
Issues to Take into Account Before Striking Off a Company
A DS01 form must be completed to apply to be voluntarily struck off the register. Before doing so, there are some issues that you should consider:
- Your company must be in a solvent position.
- The company must inform all current creditors of its plans to be struck off the register. Make sure that all potential liabilities have been taken into account.
- Complete all outstanding tasks and collect any money owed to you.
- Make any necessary staff redundancies. Pay their last paychecks and statutory benefits.
- Before the company is dissolved, its tangible and intangible assets must be transferred to another party or dealt with. If not, upon the dissolution of the Company, its assets will be transferred to the Crown.
- Prepare and submit final accounts and a company tax return to HMRC and Companies House.
- Only certain circumstances, including striking off, allow for the return of capital contributions made by a company’s shareholders. You should, however, use the ability provided by the Companies Act legislation to lower the company’s share capital before submitting a striking-off application.
- Request that HMRC terminate the company’s payroll scheme.
- There should be no legal actions taken against the company.
Before submission, you must alert the HMRC of your intention to strike off the company. They have the authority to reject your application if they are not informed. The best course of action is to get off to a good start rather than having something rejected over a formality that could have been avoided.
When a Limited Company Can Apply to Be Struck Off?
A limited company or its owner can apply to be struck off when, before three months of the application, it didn’t have the following:
- Traded or conducted business in any other way.
- Initiated insolvency proceedings.
- Changed names.
- Sold company assets.
When Can a Limited Company Not Apply to Be Struck Off?
A limited company cannot apply to be struck off when:
- There are any insolvency proceedings, including those that have been presented but not addressed, such as liquidation.
- There are agreements between the company and its customers or employees.
Striking Off Process for a Limited Company
Let’s discuss the voluntary striking-off process step-by-step for a limited company:
- First things first. You can apply to have your company voluntarily struck off the register online by logging in with your Companies House account and entering your authorization code. You will need Form DS01 for this.
- Form DS01 can also be submitted on paper, though this takes longer to process. So, online submission is a safe option.
- The DS01 application cannot be submitted for companies with multiple directors until most have signed it.
- Within 7 days, a copy of the application must be sent to anyone impacted by this strike-off procedure. Members, shareholders, creditors, employees, and directors who did not sign the application are included here.
- If your company has never traded before, the procedure is quite simple. After filing for strike off, you must notify HMRC that the company has never traded and will be removed from the Companies House register shortly.
- If your company has traded before but meets all the requirements, you must send HMRC your final statutory accounts and a Company Tax Return. You must also note that these are the final trading accounts and that the company will be dissolved shortly.
- When Companies House receives your application, they will confirm it has been completed correctly—with proper and required information—and publish it in the Gazette. The notice is referred to as the First Gazette notice.
- If no one objects to the strike off, the company will be struck off the register after the 2-month period specified in the notice has passed. A second notice, the Final Gazette notice, will be published in the Gazette, indicating that the company is no longer legally active (it has been ‘dissolved’).
- Companies House will typically accept the dissolution and permit the company to shut down without paying the fine if you owe them for late filing penalties.
What is Companies House’s Procedure for Handling a Strike-off Application?
After receiving the form, Companies House will examine it. Then, if it’s acceptable, they will do the following:
- Register the data and keep it in the company’s public records.
- Send a confirmation to the address listed on the application.
- Notify the company at its registered office address so that it can object if the application is fraudulent.
- Post a notice of the proposed voluntary strike-off in the Gazette to allow interested or notifiable parties to object.
- Make a copy of the Gazette notice available by putting it on the company’s public record.
If there is no justification for holding off or objection from anyone, the Registrar will remove the company from the register no later than two months following the notice. Following the publication of another notice in the relevant Gazette, the company will be dissolved.
How Long Does It Take to Strike Off a Company?
Removing a limited company from the Companies House register by a voluntary strike off takes at least two months to complete the whole process. Companies House will send an acknowledgment of the Active Proposal to Strike Off status following the completion and submission of the DS01 form, assuming that all the details are accurate.
Following that, a notice informing the company of the intention to strike it off will be published in the London, Edinburgh, or Belfast Gazette, depending on where the company is based. If the company director receives no objections from interested parties during that time, another notice will be published, and the company will be dissolved and erased from the register of Companies House.
Who Should I Tell About the Strike-Off Application?
Within seven days of applying to the Registrar, the directors must send a copy to:
- Members, usually the shareholders.
- Creditors, including all current and potential creditors such as:
- Banks.
- Suppliers.
- Former employees to whom the company owes money.
- Landlords or tenants (as in the case of a refundable bond).
- Guarantors.
- Claimants for personal injury.
- HMRC and the DWP (Department of Work and Pension).
- Employees.
- Any employee pension fund’s managers or trustees.
- Any directors who have not formally signed the form.
In addition, anyone who is appointed to one of the following positions after the application has been filed must be sent a copy of the application by the company’s directors:
- Creditors.
- Employees.
- Shareholders.
- Pension managers or trustees.
- Other directors of the companies.
Application copies must be sent within 7 days of the application date. Within 7 days of this, you must also send copies to anyone who becomes a notifiable party.
This obligation remains in effect until the company is dissolved or the application is withdrawn. By failing to send the notice to the appropriate parties, you will be committing an offense and could face a fine or, in the most severe cases, a 7-year prison sentence.
Final Gazette Dissolved Notice for Voluntary Strike-Off
The Final Gazette Notice for Voluntary Strike-Off is the official announcement that the company has been dissolved and struck off from the Companies House register. It is published in the London Gazette.
After the Final Gazette, the company is no longer legal and cannot conduct business.
Voluntary Strike Off Consequences
Any assets a company still has during its voluntary strike-off dissolution will automatically become Crown property. This procedure, known as ‘bona vacantia,’ involves transferring money, land, property, rights, and interests.
Bona vacantia does not, however, apply to trust-held assets or employee pensions. Before requesting a strike-off, the company’s directors must deal with these assets appropriately.
If the assets are burdensome, the Crown may disclaim them through the Bona Vacantia Division of the Government Legal Department, the Duchy of Lancaster, or the Duchy of Cornwall for companies dissolved in those areas.
This implies that they have the option to reject them, in which case they cease to be the property of the Crown.
Therefore, it is essential for a business planning a voluntary strike-off to deal with any assets before beginning the procedure. This may entail giving them away in another way, such as by selling or transferring them.
Note: Bona vacantia means ‘ownerless good.’
What Happens to Directors When Voluntary Strike-Off Strikes a Company Off?
Any debts or obligations incurred by the company after it has been struck off may be the responsibility of the directors. They might no longer be permitted to hold director positions with other companies.
A director’s involvement in the company’s failure may also be the subject of an investigation by regulatory bodies like the Insolvency Service.
Is it Possible to Reinstate a Struck-Off Company?
Yes, it is possible to reinstate a struck-off company. You can reinstate a struck-off company in two ways:
1. Administrative Restoration
You can only apply to Companies House to get your company restored (known as ‘administrative restoration’) if you meet the following criteria:
- You were a director or shareholder.
- The Registrar of Companies House dissolved your company and removed it from the register within the previous six years.
- Your company was trading at the time it was dissolved.
To restore a company administratively, you will need the following:
- A completed administrative restoration application (Form RT01).
- A £468 check made payable to Companies House.
- Any pending paperwork, including confirmation statements or accounts (previously filed annual returns).
- Any filing charges or penalties.
- A waiver letter from Bona Vacantia waiving the claim if your business had assets.
2. Restoration by Court Order
If you can not apply for ‘Administrative Restoration,’ getting a court order will enable a company dissolution due to a voluntary strike-off (Section 1003) to be reinstated. If the registrar receives a court order, they can restore a company.
Any company restored to the register is deemed to have continued as if it had not been struck off and dissolved.
Who Can Apply for Struck-Off Company Restoration?
In general, any of the following can apply for restoration:
- Any previous board member, director, creditor, or liquidator.
- Anyone with a contractual relationship with the company or a potential legal claim against the company.
- Anyone with an interest, right, or obligation in land or property where the company had an interest, right, or obligation.
- Any manager or trustee of the company’s retired employees’ pension fund.
- Anyone else who appears to the Court to be interested in the case.
Voluntary Strike-Off Objection
If someone objects to the voluntary strike off of a company, it means they are opposing the company’s request to be removed from the official register (Companies House). This objection typically arises when interested parties, such as creditors or shareholders, believe the company should not be dissolved voluntarily.
When Can You Object to a Voluntary Strike Off?
If the following conditions are met, you can object to a limited company being struck off the Companies Register:
- You are a shareholder of the company or another interested party, such as a creditor.
- You have a valid reason to prevent the company from being struck off the register, such as a valid legal claim or an unpaid debt.
- You can only raise an objection after The Gazette has published the notice that the company will be struck off.
- You must have supporting documentation for your objection, such as invoices or other evidence that the business owes you money.
Note: If you are a director, you may revoke your company’s application to be struck off by submitting Form DS02.
How Can You Object to a Voluntary Strike Off?
You can object online to a voluntary strike-off. The following are necessary for this:
- The company number of the limited company that is being struck off.
- Digital copies of your supporting documents (images, Microsoft Excel, Microsoft Word, or PDF files).
Now, remember that your supporting documents must:
- Be no older than 6 months old.
- Include the correct name ending, such as “limited” or “ltd,” and clearly state the company’s full name.
- Provide evidence to support your objection, such as invoices demonstrating the amount the company owes you.
- Be no larger than 4MB.
You must file an objection within 2 months of publishing the notice in The Gazette. To file an objection online, you must have a Companies House account.
If you cannot object online, send your objection by email or postal mail.
Voluntary Strike Off Suspended
A voluntary strike off gets suspended when the Companies House puts a hold on removing a company from the register. There are a few reasons why this might occur, including:
- A creditor has objected to the strike off. This can happen if the creditor believes that the company owes them money and that striking off the company will make it more challenging to get their money back.
- Companies House believes the company may not have met all the eligibility criteria for voluntary strike off. For example, the company may have outstanding debts or liabilities that have not been disclosed.
- Companies House is investigating the company. This may be because they have received a complaint about the company or believe it may be involved in fraudulent activity.
Companies House will notify the company if a voluntary strike off is suspended. The company will then be able to explain why the suspension was made. If the company can resolve the suspension, Companies House may proceed with the strike-off process. However, if the company cannot address the suspension, Companies House may refuse to strike the company off the register.
What Is Striking Off Action Discontinued Meaning?
Striking off action discontinued means removing a company from the Companies House register has been stopped completely. This can happen for quite a number of reasons, such as:
- The company has filed all of its outstanding annual returns and accounts.
- The company has paid all of its outstanding taxes and other debts.
- The company has provided evidence that it is still trading.
- The company or its interested parties (creditor, other directors, shareholder, employee) have successfully objected to the strike off.
If a company’s voluntary strike off has been suspended, the company can also apply to have the suspension lifted. The company will need to address the reason for the suspension to be successful in its application.
Withdrawing Your Application for Strike Off
If your company ceases to be eligible for being struck off, such as if it starts trading or goes insolvent, you must withdraw your application. You may also withdraw your application if you change your mind and want to continue with your company.
You should send a paper copy of the DS02 form or use the Companies House online service to do this immediately.
You can find the form on the website of Companies House.
Strike Off Alternatives for Insolvent Companies
When your company is insolvent and you know striking it off is not an option, there are some alternatives that can help address the financial challenges and protect the interests of your company’s creditors. Take a look to learn the following:
- Company Voluntary Arrangement (CVA): A Company Voluntary Arrangement is a formal agreement between a company and its creditors to repay debts over a set period. A CVA can help a company avoid liquidation or bankruptcy by allowing it to keep operating while reorganizing its debt.
- Creditors’ Voluntary Liquidation (CVL): A CVL, or Creditors’ Voluntary Liquidation, is a formal process for liquidating a company that cannot pay its debts. This process entails naming a liquidator to liquidate the company’s assets and distribute the proceeds to creditors.
Strike Off Alternatives for Solvent Companies
For a solvent company with at least £25,000 in cash and assets, a Members’ Voluntary Liquidation (MVL) is a viable option.
The tax advantages of an MVL stem from the fact that distributions to shareholders are taxed as capital rather than income. This suggests that the shareholders may be exempt from income tax and instead be subject to capital gains tax (CGT) on the distribution. Since CGT rates are typically lower than income tax rates, shareholders may significantly reduce their taxable income.
Furthermore, if the company qualifies for Business Asset Disposal Relief (Entrepreneur’s Relief), shareholders may be eligible for a 10% CGT reduction on the distribution, subject to certain conditions. This can result in even more tax savings for shareholders.
Voluntary Strike Off Application Rejection
A voluntary strike-off application could get rejected for various reasons or mistakes. Many of those mistakes are avoidable. Therefore, it must be carefully handled before submitting an application. The mistakes include, but are not limited to:
- Interested parties are not being notified on time.
- One of the more serious reasons for rejection is that HMRC believes tax is still owed.
- There are unresolved claims against the company.
- The company hasn’t filed the required documents or financial statements.
- The application contains errors or incomplete information.
- The company is embroiled in ongoing legal proceedings.
- Creditors are opposed because of outstanding debts.
- Failure to respond to requests for additional information from Companies House.
- etc.
The abovementioned reasons will lead to a rejection of the application. So, stay aware and be compliant.
A Voluntary Strike Off: Pros and Cons
A voluntary strike off has both advantages and disadvantages. Look below to learn about those:
Pros of a Voluntary Strike Off
A voluntary strike off has both advantages and disadvantages. Look below to learn about those:
- Once a company has been struck off, it is no longer required to file annual returns and accounts with Companies House. The proper accounts and returns must still be filed even if the company is left dormant rather than being struck off. If the directors fail to comply, financial penalties will be applied.
- A voluntary strike off is a quick and inexpensive process of closing a company.
Cons of a Voluntary Strike Off
- The HMRC is known to quickly oppose such a move if you have tax debts and will try to force your business into compulsory liquidation. Creditors can also object to a strike-off.
- Directors must notify all creditors; if a creditor files a claim later, the company can be reinstated for up to 20 years, even after closing it. It would be treated as if there had been no strike off, and your conduct as a director would be investigated.
- If the company becomes insolvent, the directors face serious consequences, including personal liability and disqualification for up to 15 years.
What Happens After the Company Is Dissolved?
Even though the company will no longer exist, information about dissolved companies is kept for 20 years. If the necessity arises, Companies House or the National Archives can still request this dissolved information. It is crucial to remember that another person with a new, unique company number can use the company name.
It is best to get expert advice before you make any decisions, as with any legal procedure.
Worried? Speak to an Expert to Stay Compliant!
Although closing a company is a good decision, the whole process could exhaust and confuse you. We understand your dilemma. So, to simplify the whole thing, we have tailored and fabricated some fantastic service packages just for you.
Our UK company dissolution service is here if you want to dissolve your company with proper legal compliance. A premium business consultation service will be perfect for learning about restoring your struck-off company. We can provide legal help from an accountant and a legal counselor.
FAQs
Q1: A Company Voluntary Strike Off: Is It a Remedy for Insolvent Companies?
Answer: No, a company strike off is not a solution for insolvent businesses. A company strike off is removing a company from the Companies House register. It is a voluntary process, and the company must meet specific eligibility criteria.
Q2: What Is the Cost of Voluntary Striking Off a Company?
Answer: It will cost £44 in total to voluntarily strike off a company. You can’t use a company account cheque to pay if you’re closing that company.
Q3: How Can a Company Be Shut Down Cheapestly?
Answer: The cheapest way to close a business is to strike it off from the register of Companies House.
Q4: What Happens to the Company’s Assets Following a Voluntary Strike-Off?
Answer: Any assets a company still has at the time of its voluntary dissolution automatically become Crown property when it is struck off.
Q5: When Is a Company Ineligible to Apply to Be Struck Off the Register?
A company cannot apply to be struck off if:
- The company has not traded or changed names in the last 3 months.
- The company is not threatened with liquidation.
- There are no agreements with creditors, such as a Company Voluntary Arrangement (CVA).
Last Words
To summarize the whole thing, if a voluntary strike off a company becomes mandatory, do it. Gather all required documents, stay solvent, and apply for a voluntary strike off properly. Inform all the notifiable parties. Pay all the outstanding debts. Stay in complaint with HMRC and Companies House.
Striking off a company could be exhaustive and confusing to handle on your own, so it’s greatly advisable to take advice from a legal counselor who can guide you through the process.
