When a limited company is formed, its name must be officially documented in the Register of Companies at Companies House. If the company is later struck off for any reason, the name is removed from this register.
There are two types of company strike off – voluntary and compulsory. Voluntary strike off typically occurs when a business has served its purpose and is no longer needed – if a sole director is retiring, for example.
A company may also be forcibly struck off the register, and this usually means it’s failed to submit accounts by the filing deadline, perhaps more than once. Compulsory strike off is typically instigated by Companies House, and when this happens it suggests there may have been financial issues within the business.
Striking off your own company is an inexpensive way to close down, but the business must be solvent. Retirement is a common reason to voluntarily strike off a company, but sometimes a director is looking to move on to another venture and the business serves no further purpose.
You need to follow a series of steps before your application for strike off will be accepted by Companies House, however, and to be eligible for company strike off you need to cease trading for three months beforehand.
Additionally, you can’t change the name of the company in this timescale, or carry out any business activities apart from those required to strike off. It’s worth mentioning again that company dissolution is only for solvent businesses, which means you must be able to repay all your creditors within 12 months of strike off.
Here’s a brief outline of the steps you need to take prior to striking off your company:
You need to complete form DS01 to apply for strike off, and within seven days send a copy to all interested parties. This could include employees, creditors, shareholders, and other directors. Once Companies House has checked the form and agreed to the strike off, a notice will be placed in the Gazette.
This alerts company creditors to your intentions, and enables them to object to the strike off if necessary. Voluntary strike off is a fast way to close down a company, but it’s not without significant risk for company directors.
When you voluntarily strike off your company, you need to be certain that it’s in a solvent position, taking into account all debts including contingent liabilities. These are liabilities that may materialise in the future, and can include claims against the company made by employees or customers.
If your company is insolvent and you try to strike it off, you could be at risk of disqualification as a director, as well as personal liability for any claims that later become due. Your company can be reinstated to the register when it’s been struck off in this way, for up to 20 years later.
This is why voluntary liquidation might be a better option – it’s administered by a licensed insolvency practitioner (IP), and reduces your risk of liability in the future. Should your company be insolvent, entering Creditors’ Voluntary Liquidation (CVL) also means you may be able to claim redundancy pay as a director.
When Companies House forcibly strikes off a company, it can have serious consequences for directors. Companies are typically struck off due to late filing of their annual accounts, and failing to respond to Companies House notifications.
As with voluntary strike off, if any assets remain under company ownership at the time of the strike off, they become property of the Crown. Directors can face allegations of misconduct when their company is struck off the register by Companies House, and potential disqualification for up to 15 years. If there are any debts remaining within the business, directors could also become personally liable.
For more information on company strike off, please contact our team of experts at Real Business Rescue to arrange a free same-day consultation. We can offer reliable advice on the strike off process, the potential ramifications for you as a director, and whether voluntary liquidation would be more suitable. Real Business Rescue operates an extensive network of offices around the UK, so you’re never far away from professional assistance.
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