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When will Companies House not allow you to close your limited company?
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Why might your strike-off application be rejected?
Applying to Companies House to close down a limited company is the easiest way to bring an end to your business, but you have to be careful. Although it’s an attractive option, you must meet certain requirements before you can strike your business off the Companies House register. And if you close down a company at Companies House incorrectly, it could lead to a director disqualification and other sanctions.
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As a company director, you can use a process called company strike-off or dissolution to remove your business from the Companies House register. This process is suitable for limited companies that can repay all their debts and don’t own significant assets. Solvent companies with valuable assets (over £25,000) are typically better served by a Members’ Voluntary Liquidation (MVL), which is a more tax-efficient way of distributing assets to the shareholders.
The process to strike off or dissolve a company is relatively simple. You can either submit the paper form DS01 and pay a £10 fee or follow the online process for £8. As long as you follow the rules correctly and the business can pay all its outstanding liabilities, the company will be struck off the register and no longer exist as a legal entity.
Your company must be solvent, have no ongoing legal action against it and have not traded, sold any property or changed its name in the three months before you submit your strike-off application.
You must also:
- Submit outstanding statutory returns and accounts
- Pay outstanding tax liabilities
- Close the payroll
- Sell or transfer company assets
- Close the company’s bank accounts
- Inform the creditors of the intended closure
Companies House will check the details of your application. As long as you meet these requirements and there are no objections to your strike-off, the company should be removed from the register around three months after your application.
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There are several reasons why Companies House might reject your strike-off application. It will send you a letter informing you of its decision, although the letter may come from HMRC if the company has outstanding tax liabilities. The letter will set out the actions you need to take to be struck off the register and explain how you can appeal.
If you have to settle a tax bill before your strike-off application can be accepted, you must be careful how you repay the debt. There’s a risk the company could be seen as trading and your strike-off application may subsequently be denied. This is a situation we can advise you on.
Companies House could reject your strike-off application on any of the following grounds.
You submit your application incorrectly
It’s not unusual for directors to submit applications with omissions or errors. In this case, Companies House will ask you to resubmit the application with all the required information.
You have actively traded in the past three months
You can only strike off a non-trading company. You must submit your application at least three months after your last trading activity.
You have changed the company’s name in the past three months
Your strike-off application will be rejected if you change the company’s name in the three months before submission. You will have to wait for three months after the name change to resubmit your application.
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The application is not submitted by a director or the majority of directors
Only a company director can submit a strike-off application. Where there are multiple directors, a majority of those directors must sign the application. If there are no directors (for example, the only director has resigned or passed away), you will have to go through the compulsory strike-off procedure.
There’s an ongoing insolvency process
You cannot dissolve a company that’s part of an active insolvency procedure, such as a Company Voluntary Arrangement (CVA). In this case, you’ll need to close the company by other means, typically a Creditors’ Voluntary Liquidation (CVL), or wait until the insolvency procedure has ended before applying for strike-off.
As well as Companies House, other interested parties can object to your strike-off application. Once you’ve submitted your application, Companies House will place a notice in the Gazette to inform other parties of your intention to dissolve the business. They then have two months to raise an objection. Parties that can object include:
- Your creditors
- Anyone engaged in legal proceedings against the company
- Interested parties you have not informed of the strike-off application
- Anyone with proof the company has changed its name or traded in the last three months
Common objections come from HMRC for unpaid tax liabilities and trade creditors chasing unpaid invoices. The UK Government is also becoming a more frequent objector in respect of unpaid Bounce Back Loans and Coronavirus Business Interruption Loans.
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If you owe money to a single creditor, you can repay what you owe and resubmit your strike-off application. Alternatively, you could resubmit your application without repaying the creditor and hope they don’t object. However, this approach is rarely successful as you’ll now be on the creditor’s radar.
If you have multiple unpaid creditors, you could clear all your debts and resubmit the application. If only one or two creditors have objected to your strike-off, you should be very wary about repaying just those creditors and then dissolving your company. This is likely to be seen as a preference payment and could lead to personal liability issues or even a director disqualification.
If you have multiple creditors you cannot repay, you’ll need to consider alternative methods to close your limited company. This will typically take the form of a Creditors’ Voluntary Liquidation.
In this case, you’ll appoint a licensed insolvency practitioner to take control of the company and liquidate its assets to repay the business’s creditors as far as possible. Any outstanding debts will be written off and the company will be struck off the Companies House register.
If you’re unsure how to close your limited company or are worried that Companies House could reject your strike-off application, we can help. Call our free director helpline on 0808 253 3817 or arrange a free consultation at one of our 100+ nationwide offices.
Further Reading on When will Companies House not allow you to close your limited company?
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