Limited company strike off - also known as dissolving a company - is the process of bringing an unwanted company to an end and removing its 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 must be brought to an end.
Dissolving - or striking off - a limited company: What you need to know
Striking off a limited company - also known as company dissolution - is when a company is voluntarily struck off the register held at Companies House.
The reality is that very few businesses last forever and there may come a time when you need to consider closing your limited company. A company which does not have any debts, or has debts which it is able to repay in full, may be able to use the strike off option as a quicker and cheaper alternative to formal liquidation when looking to close the company.
If you are considering striking off your limited company, here are answers to the most frequently asked questions regarding company dissolution:
What does company strike off or dissolution mean?
To dissolve a company, which is also known as ‘company dissolution’ or ‘striking off a company’, is a way of bringing a limited company to an end by having its name removed from the official register held at Companies House. Once the name is struck off the register, the company no longer legally exists.
Dissolving a limited company 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.
Liquidation is different. If your company is unable to pay off what it owes, entering into an insolvent liquidation process is going to be more appropriate than strike off.
Liquidation can only be entered into under the guidance of a licensed insolvency practitioner who will oversee the whole process on your behalf. If you would like to close a limited company with debts, our team can provide expert advice on the liquidation process.
As well as your company being solvent, there are other conditions that must be met before you can strike off a limited company via the dissolution process. Your company must:
Not have traded or sold off any stock in the last 3 months
Not have changed names in the last 3 months
Not be threatened with liquidation or any other type of insolvency proceedings, or have a formal repayment agreement with creditors such as a Company Voluntary Arrangement (CVA)
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The process of striking off your limited company is done through submitting a DS01 form which must be signed by a majority of the directors (or all if there are two or fewer). The form must be sent to Companies House and a copy must also be sent to all ‘notifiable parties’ which includes creditors, employees and shareholders.
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, so long as no objections are made. The Gazette will then run a final notice confirming that the company has been struck off.
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What do I have to do before striking off my limited company?
Before applying to dissolve your limited company and have it struck off the Companies House register, you have a number of responsibilities. These include:
Ensuring business assets are distributed among shareholders. It is vital that this is done prior to applying for strike off, 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 procedures 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
Asking HMRC to close down the company’s payroll scheme and deregister for VAT
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 strike off application with Companies House
Can anything stop the strike off of my limited company?
If an objection is upheld by the Registrar then the company will not be allowed to be dissolved and your strike off application will be suspended.
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 beforehand.
There may also be a reason why you, as director of the company, have to halt the strike off proceedings. You must retract your application if your company changes its name, continues to trade, or you become aware it is actually insolvent. If this happens, you must complete form DS02 to reverse the planned strike off.
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When a limited company is dissolved at Companies House, it ceases to exist as a legal entity; it is consequently unable to trade and all business operations must stop immediately. Directors may be able to set up a new limited company if they wish to continue their business endeavours, but trade cannot continue through the dissolved company in any circumstance.
What are the disadvantages to striking off my limited company?
While dissolving your limited 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 strike off, 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 limited 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. If a creditor is successful in restoring your dissolved company to the register, this would then allow them, and any other outstanding creditors, to continue to chase your company for the unpaid debts.
Closing down your limited company through a formal liquidation process - such as a Creditors' Voluntary Liquidation - reduces the risk of your company later being restored to the register by creditors. This is because 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 closure is administered by a licensed insolvency practitioner, disgruntled creditors are extremely unlikely to be able to successfully petition for the company’s restoration.
Director Redundancy and Company Dissolution
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 limited company directors opt for strike off rather than liquidation is because it is a much cheaper option compared to the average cost of liquidation.
However, what is often overlooked is that going down the liquidation route could also unlock potential director redundancy – the value of which could be greater than the cost of the liquidation fees.
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 director redundancy upon the company going into liquidation. It is advisable you check your potential entitlement to director redundancy before making a final decision on how to proceed with the closure of your company.
Remember, director redundancy is not available if you dissolve your company using the DS01 strike off process.
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What are the alternatives to dissolving my limited company through the strike off process?
Dissolving your limited company may be the best course of action in relatively straightforward situations where there has been little or no trade and there are no debts to pay nor any money to take out of the company; however there are other options you may want to consider before opting for strike off if your situation is 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. An MVL differs from an informal strike off process 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, 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 dissolving your limited company and are unsure whether using the strike off process is the best way, 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.
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