Company strike off is the process of removing a company’s name from the register held at Companies House. Once a company has been struck off – or dissolved – it will no longer exist as a legal entity and all trade will be forced to stop.
Company dissolution is when a company is struck off Companies House which is the public register on which official company information is displayed.
The harsh reality is that very few businesses last forever and there may come a time when you need to consider dissolving your limited company. There are a whole host of reasons why you may be looking into this option; your business may have been successful but has now served its purpose, or maybe it never got off the ground at all and has been sitting dormant ever since.
If you are considering dissolving your company, here are answers to the most frequently asked questions regarding company dissolution:
To dissolve a company, which is also known as ‘dissolution’ or ‘striking off’, is a way of closing down a limited company by removing its name from the official register held at Companies House. Once the name is removed from the register, the company no longer legally exists.
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Is it the same as liquidation?
No, liquidation and dissolution are two different processes. Dissolution is a way to achieve company closure in situations where no debt is present, or where any outstanding debt and other liabilities can be settled in full within 12 months.
Liquidation is different. If your company is unable to pay off what it owes, liquidation is likely to be the most appropriate option for you. Liquidation involves extracting the assets from a company, selling these to realise as much money as possible, and putting these towards paying off any outstanding debts. Liquidation can only be entered into with a licensed insolvency practitioner who will oversee the whole process on your behalf.
Can I dissolve my company?
As well as your company being solvent, there are other conditions that must be met before a company is eligible for dissolution. Your company must:
Not have traded or sold off any stock in the last 3 months
The process of dissolving your company is done through submitting a DS01 form which must be signed by a majority of the directors (or all if there is only one or two). The form must be sent to Companies House for processing and a copy must also be sent to all ‘notifiable parties’ which includes creditors, employees and shareholders. Alternatively, this process can now be completed online through the Companies House website. A notice will then be placed in the Gazette announcing your decision to dissolve the company. Your company will officially be dissolved 3 months after this notice is published, providing no objections have been made. The Gazette will then run a final notice confirming the dissolution of your company.
What do I have to do before closing down my company?
Before applying to dissolve your company, you have a number of responsibilities. They include:
Ensuring business assets are distributed among shareholders. It is vital that this is done prior to applying for dissolution, as any assets remaining with the company upon dissolution become Bona Vacantia and ownership automatically passes to the Crown
Paying employees their final wages and ensuring you follow certain rules if you are making staff redundant
Paying any outstanding Corporation Tax, PAYE, NI and settling any other tax liabilities
Filing accounts and a company tax return with HMRC. You must state that these are the final accounts due to the planned dissolution of the company
Confirm that the company can, or has, paid any outstanding debts
Closing the company bank accounts
Informing all interested parties and HMRC of your decision to dissolve the company. This must be done within 7 days of lodging your application with Companies House
Following the dissolution of your company, you are required to keep any records and documents relating to the business for 7 years.
Can anything stop my company being dissolved?
Anyone can object to the proposed dissolution of your company. If your company owes money, then you should expect your creditors to submit an objection to your application. If an objection is upheld by the Registrar then the dissolution will not be allowed to go ahead. You should be aware that a creditor can apply for a court order to restore your company to the register even after dissolution if you have evaded paying them. This is why it is crucial that you inform all interested parties of your intention to dissolve the company and ensure all creditors are fully paid.
There may also be a reason why you, as director of the company, have to halt the proceedings. You must retract your application if your company changes its name, continues to trade, or is made insolvent. If this happens, you must complete form DS02.
What are the drawbacks to dissolving my company?
While dissolving your company may seem like a straightforward process, caution must be exercised. If you provide false information in your application, deliberately or otherwise, or fail to notify an interested party of your decision to dissolve, the consequences can be severe. You can face disqualification as a director, be handed a considerable fine, or even face imprisonment in extreme cases.
Should a creditor believe your company has not been closed down through the correct channels, or has another legitimate reason for arguing against the closure, they can appeal for your company to be restored to the register at Companies House. This would then allow them, and any other outstanding creditors, to continue to chase your company for the unpaid debts. Alternatively, closing down your company through a formal liquidation process is a more final act. The insolvency practitioner overseeing the liquidation will ensure the maximum amount of money is realised from company assets and that this is distributed fairly among all creditors. If a company’s wind down is administered by a licensed insolvency practitioner, disgruntled creditors are extremely unlikely to be able to successfully petition for the company’s restoration.
If you are in any doubt as to whether you qualify for dissolution, how to go about completing the necessary paperwork, or even whether it is the best option for you, you should contact a professional who can talk you through the whole process and discuss the best option for you and your business.
Dissolution and director redundancy
Another less well known drawback of dissolving, rather than liquidating your company, is the removal of your right to claim director redundancy. Director redundancy works in largely the same way as staff redundancy and can be a hugely valuable lifeline at this stressful time.
The reason many directors opt for strike off rather than liquidation is because it is undoubtedly a much cheaper option at £8 compared to the £5,000 average cost of liquidation. However, what is often overlooked is that going down the liquidation route could unlock potential director redundancy – the value of which could dwarf the liquidation fees. In fact, while the average liquidation fee is around £5,000, the average director redundancy claim is £9,000. Not only could this money pay for the liquidation, but it could also give you an additional financial boost moving forwards.
As long as you are paid a regular salary through the PAYE system, work a minimum of 16 hours per week for your company, and your company has been incorporated for at least two years, it is likely you will be able to claim. You can ascertain whether you have a valid claim and the level this claim is likely to be by using the Redundancy Claims UK calculator. It is advisable to do this before making a final decision on how to proceed with the closure of your company.
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Are there any alternatives to dissolving my company?
Dissolving your company may be the best course of action in relatively straightforward situations; however there are other options you may want to consider if your situation is a little more complex.
Just like dissolving a company, a Members’ Voluntary Liquidation (MVL), is only an option for companies capable of settling its debts within 12 months. The MVL must be agreed to by a minimum of 75% of the company’s directors. An MVL differs from dissolution as a liquidator is appointed to assist in the process. The liquidator will contact all creditors and ask for proof of debt. When all outstanding debt has been satisfied, all remaining funds will be distributed amongst the shareholders. The appointment of a liquidator means more costs are incurred with an MVL when compared to dissolution. However, if a high value of shareholder funds is involved, it may make better financial sense from a tax perspective to go down this route.
Register the company as dormant
While it is possible for a dissolved company to be restored to the register for up to 6 years after closure, this comes with significant financial costs. If you believe you may have use for the company in the future, registering it as dormant may be a better option. Doing this keeps the company on the ‘back-burner’ in case you want to revive it at any point.
How Real Business Rescue can help
If you are considering closing down your company and are unsure as to the best way of doing this, Real Business Rescue can help. Our team of licensed insolvency practitioners can talk you through all the available options, including dissolution and liquidation, and suggest the most appropriate course of action for you and your business. Call our expert advisers today to arrange a free no-obligation consultation. We have an extensive network of 100 offices offering confidential director support across the UK.
Frequently Asked Questions about Dissolution
What is the company dissolution process?
Company dissolution – or ‘strike off’ – is the process of closing down an unwanted company and removing its name from the register held at Companies House. The process of dissolving a company is done by the company’s directors by submitting a DS01 form and paying the relevant fee. A notice is then placed in the Gazette stating the company’s intention to strike itself from the register. If no objections are received, the company will be dissolved. If a company or individual does object to the strike off, however, the process will be suspended and the company will continue to exist.
Is dissolution right for my business?
Dissolution is not a formal insolvency process, and in many cases, it is not be appropriate for the company’s situation. Dissolution is only suitable for companies without any outstanding debt or liabilities to creditors. If your company owes money, you can expect that they will lodge an objection to your strike off application once this is placed in the Gazette. This is because once your company ceases to exists, creditors will no longer be able to chase the business for the money it owes. It is therefore in their interests that your company remains active. If your company has outstanding debts, you will need to explore placing the company into a voluntary liquidation process known as a CVL. This will ensure creditors are treated fairly and in accordance with the Insolvency Act 1986 while still allowing you to bring your company to an orderly end.
What happens after my company has been dissolved?
Dissolution is a process to bring about the end of an unwanted company. When a company has been dissolved, it will cease to exist as a legal entity. All trade will stop, the company’s name will be removed from the Companies House register, and it will have no further filing requirements. While dissolution can be reversed in occasional situations, this is a costly, time-consuming and therefore relatively rare occurrence, so dissolving your business should be seen as a serious and permanent step. If you have reason to believe you may want to use the company (and its name) in the future, you may wish to consider registering the company as dormant instead.
Is dissolution the same as liquidation?
While dissolution and liquidation both bring about the end of a company, they are actually different processes. Dissolution is an informal way for a solvent – yet unwanted – business to close. The whole process can be handled by the director without the involvement of an insolvency practitioner. Upon dissolution any company assets become ‘bono vacantia’ and ownership will pass to the Crown; if the company has debts, expect the dissolution application to be challenged. For straight forward cases, dissolution may be appropriate, however if there are considerable assets or debts involved, a formal liquidation process is likely to be the most appropriate solution. For solvent companies, liquidation is achieved through a Members’ Voluntary Liquidation (MVL), while a Creditors’ Voluntary Liquidation (CVL) is used to close insolvent companies.