Striking a Company Off and the Consequences
Company strike off involves removing all details of your limited company from the Companies House register. Once you opt for voluntary strike off, and it is approved, your business will, effectively, no longer exist. You will have to file the DS01 – the company strike off form – to do so. It’s important to note that only a solvent company can go down the route of voluntary strike off. If you do have debts owing to creditors, they must be repaid before filing the DS01 form. Any company that is also in the process of a formal insolvency procedure is not eligible.
How to strike off a company
As mentioned above, you must file a DS01 form to strike your business from the Companies House register. In the three months before the company strike off procedure, your company must not have:
- Sold any assets or rights by the business
- Changed the company name
- Initiated the process of a formal insolvency procedure
The procedure to strike off voluntarily is not available for a business that cannot meet its liabilities, has an outstanding winding up petition or an arrangement with creditors (CVA etc.). Once a company strike off form has been filed, the company can no longer trade, sell company assets or become involved in any other business activities. For all intents and purposes, your business is closed. If your company is found liable for the above, you could face severe penalties. These penalties can include a directorship ban for up to 15 years.
If you have any company assets that have not been distributed before dissolving the company, they will be transferred back to the crown, via ‘bona vacantia’. It’s, therefore, important to tie up all such matters prior to dissolution. Were you to try and recoup those assets post-dissolution, you would have to restore the business to Companies House, which can be a costly process. Your company name will be available for others to use once it has been removed from the Companies House register.
Filing a DS01 form
There are a number of reasons directors may choose to voluntarily strike off their company:
- Business challenges
- Business idea wasn’t successful
- Lack of growth
It’s also worth looking into the possibility of selling the company as a going concern – only if the existing business is financially viable. More information on the going concern procedure can be found here.
When applying, a company strike off fee of £10 is payable to Companies House. The cheque must be payable to Companies House, and not sent from the account of the business. If so, you could be classed as still trading, effectively in breach of the voluntary procedure. You can download the DS01 form here and send it to the relevant offices.
Overall, it takes at least three months for a company to be struck off, assuming there are no problems and all details are correct. A notice will later be published in the London, Edinburgh or Belfast Gazette – depending on your business location. This is to allow any interested parties to object to the company dissolution. If so, the procedure will be suspended upon further investigation.
What happens next?
When you file the DS01 form, you have seven days to alert all interested parties:
- Any directors who didn’t sign the DS01 form
- The manager or trustee of the employee pension fund
If you do have company debts, you cannot complete the voluntary strike off procedure until they have been resolved. Unfortunately, Companies House does not alert you to which creditor has objected, so you must be aware of all cash flow issues. Similarly, generally, HMRC will reject the applications if they have not been told of the strike of procedure beforehand.
It is made very clear on the Companies House website that this is not an alternative to insolvency. You must have followed the correct procedures when applying, and those who do not can face penalties. If your company has been struck off, but there are debts that can be proved, the creditor can apply to have your business placed back on the register. If they are successful, they can initiate proceedings to recoup their debts, which could include a winding up petition. Similarly, HMRC are able to still attempt to recoup the money you may owe. You could also accrue additional penalties, with the tax arrears backdated.
Once the DS01 form has been received by Companies House, and the notice has been published in the gazette, the company will be struck off the register 3 months from the date of the notice, if no objections are received.
What happens if the DS01 form is rejected?
In some cases, you may not be eligible for this procedure. One of the most common reasons for rejection is HMRC believing you owe unpaid tax. Other reasons can include:
- A creditor opposing the strike off due to unpaid debts
- Evidence of you trading or changing the business name in the three months before filing the application
- Interested parties not being informed of the decision
- Legal proceedings currently against the company
A note on compulsory strike off
It’s possible that your company may receive a strike off notice from Companies House, due to not filing accounts and ignoring warnings. According to The Companies Act 2006, Companies House must send two late payment notices to the company address. If these are ignored, they can then send a strike off notice. This will be placed in The Gazette and is a public record. Your business can be struck off even if still trading due to not filing accounts and failing to reply to warnings, and will simply not exist. You must, therefore, respond to a strike off notice if you do not intend to close the company down. The consequences of the strike off notice may involve:
- Dissolution of your company, even if still trading
- Company assets transferred to the crown
- You may struggle to receive finance from lenders in the future
- Director disqualification
If you are considering company dissolution but the company does have outstanding debts, we recommend that you speak to one of our business rescue experts for a free, informal, initial consultation. There are other processes that may be much more suitable for you and actually ultimately leave you in a better financial position. If, for example, as director you have outstanding employment entitlements owing from the company, voluntary liquidation may be a much more cost effective way of closing down your company.
Dissolution Review Tool
Legislation is changing with regards company dissolution. The changes are in relation to circumstances where the dissolution process is used to shut down a company that has remaining debts or liabilities. Under the new changes, directors who dissolve companies with existing liabilities may be held personally, financially liable.
Dissolution may not be appropriate for your business. Our Business Rescue Experts can provide free advice on the next steps for closing your business with an initial informal consultation.
Dissolution appears to be the most appropriate route for your company.
You may in fact benefit from a claim for entrepreneurs relief, if you would like to find out more, our business rescue experts will be happy to advise you on the next steps.