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Considering company strike off over liquidation? Have you considered your right to redundancy?

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Considering company strike off over liquidation? Have you considered your right to redundancy?

Reviewed: 17th January 2017

If you are looking to strike off your company, it would be wise to consider your potential right to claim director redundancy, among other statutory entitlements, before you begin the process. By opting for the strike off procedure, you could be relinquishing these entitlements without even realising.

If you are looking to cease trading and close down your company, you may find that there are various options open to you. If your company is solvent, meaning there is no outstanding debt to creditors and is fully up to date with all tax and accounting liabilities, one option is applying to voluntarily strike off your company from the register at Companies House. Strike off, which is also known as company dissolution, may seem like an attractive option as not only is it a relatively quick process, but you may find the financial outlay to be significantly less compared to formally liquidating the company. Despite this, there is an often overlooked downside to striking off which should be considered before you make any rash decisions.

By opting for strike off you are forgoing the statutory entitlements that you have built up during the time you have been operating your company. This includes redundancy pay, and other monies such as holiday pay, notice pay and any unpaid salary. If you have been running your company for a number of years this could add up to a significant amount, which could potentially eclipse the cost of the liquidation. To put this in perspective, the average redundancy amount claimed by directors is £12,000 whilst the average fee for company liquidation is around £5,000. So while on the surface, dissolving a company may seem more cost-effective than liquidating it, if you delve a little deeper you could actually find yourself out of pocket by going down this route.

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At a time when you may be at a crossroads as to your future following the closure of your company, a redundancy pay-out could make all the difference in helping you start planning your next move. It is important to note that if you own the company jointly with others, your fellow directors are also able to claim their own entitlements based on their eligibility.

Putting the redundancy element to one side, strike off comes with its own unique challenges. By opting for strike-off, you are taking on full responsibility for ensuring you follow the correct procedure and that all your obligations have been met when bringing your company to a close.

Ensuring business assets are distributed among shareholders, informing all interested parties and HMRC of your decision to dissolve the company, and settling any outstanding liabilities such as Corporation Tax, PAYE, NI and any other creditors.

Failure to adhere to these responsibilities could see you facing kick-backs even if the company has already been dissolved. The company could be restored to the register should any of your creditors challenge the dissolution; this is often the case if you fail to pay your creditors in full, even if this is done inadvertently. By opting for liquidation you are protecting yourself by placing the whole process in the hands of trained and experienced professionals who will ensure everything is done ‘by the book’ and you can rest assured that your company is brought to an end in the correct way.

In liquidation cases, redundancy money is paid from a government fund known as the Redundancy Payments Service (RPS). This has been set up specifically to help those affected with losing their jobs following company insolvency. Where redundancy is concerned, it is important to realise that as well as being a company director, you are also an employee and therefore you have a right to claim.

Remember, if you chose to strike off your company rather than going down the route of liquidation, you give up your right to claim redundancy and other statutory entitlements. Don’t strike off your company without speaking to us first! With 55 offices across the UK, you’re never far away from expert and confidential advice.


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