What directors and business owners need to know

Striking off, or dissolving a company is one of the most straightforward ways to close a business down.

You print off a DS01 form, fill it out, pay your fee and send it to Companies House.  Or if you’re less organised, maybe you fall behind on your annual accounts or other statutory filings, and Companies House will start a compulsory striking off process.

If the your company has no outstanding debts, it should go through without any unnecessary delays. 

But it can also be objected to and the company dissolution suspended by creditors intervening within a two month window of the company dissolution application being filed. 

Why can a voluntary or compulsory strike off be suspended? Here’s the main reasons:
HMRC can object to a strike off in order to pursue any owed taxes or returns not filed; suppliers can challenge the process if there are any unpaid invoices remaining or customers can halt matters if they are claiming that goods haven’t been received or that work is left uncompleted.

Liquidation or Dissolution – which option is most likely to work?

Having a strike off suspended can be frustrating and annoying but it’s an essential part of a checks and balances system to allow creditors voices to be heard and avoid any directors trying to close down a company without accounting for their due outstanding debts or taxes. 

What should I do if striking off is stopped?

How you proceed next depends on the circumstances surrounding why Companies House are not striking off your business:

  • Find out who objected to dissolution and why

The first step in how to find out who objected to the strike off is simple.
You can contact Companies House directly and they will be able to tell you the nature of the objection and who made it. This is important because only then can you clear the specific impediment to your strike off being accepted. 
For instance if HMRC have stopped the strike off then you need to find out which taxes are outstanding and for what period as it may be several years that have accrued rather than one outstanding period. In all likelihood if HMRC are the objecting party then they will write to you outlining their objection and suggested remedies.
If any other creditor objects to your strike off, again, you need to find out the exact debt or reason in order to deal with it effectively. 

  • Pay the debt off

If your strike off application has been suspended due to an outstanding debt then you could settle it then submit the application again.  
This removes the reason for the objection so there should now be nothing stopping it from proceeding. Obviously this depends on the size of the debt and the company’s ability to pay it.

  • Clear all company debts

If the company owes various amounts to different creditors then the problem becomes more intractable and brings into question the validity of striking off as a means of closing the business.  
In this scenario, if you make a payment to one creditor that has objected but none of the others, it would be classed as making a preferential payment, which could have personal ramifications for the directors.

IMPORTANT – A company has to be inactive for three months before being eligible to be struck off and paying off debts from company bank accounts or funds could invalidate this requirement. 

If you intend to pay off outstanding debts and resume a dissolution, you should get some professional advice first to ensure you meet the criteria and aren’t wasting your time as Companies House will not strike off.

  • Liquidate your company

While striking off comes with advantages, it is really only applicable to businesses that meet certain specific criteria in order to close.

If you don’t meet these then it doesn’t mean that the company can’t close. It only means that you should pursue a different method of closing the business such as liquidation. 
This is where a licensed insolvency practitioner oversees the closure of your business, and deals with any assets and all the outstanding debts.

If your company has debts, then liquidation rather than dissolution is likely to be the best route to closure. 

Can you reuse the same company name after liquidation?

Directors redundancy claims

If a company’s directors took any earnings as PAYE salary, it may well be that if they liquidate the company then they can claim outstanding employment entitlements from the government’s National Insurance Fund.

If your company’s striking off has been suspended or objected to, then it’s probably worth taking a moment to consider whether liquidation is a better option.

Chris Horner, Insolvency Director with BusinessRescueExpert, offers this advice: 

Dissolution or striking off a company sounds like the ideal solution to close down a business but directors and owners usually don’t understand how prescriptive and narrow the acceptable criteria for doing it is, which is why a company’s striking off is suspended.

“In the hundreds of cases we’ve dealt with, so many businesses that want to close, have not been properly advised, and are therefore wasting valuable time and resources. 

“Some directors have also been unaware of their rights to recover employment entitlements under liquidation, let alone that overall if you have significant outstanding debts liquidation is actually the best option for them.” 

Tough love is still love. 

If you’ve decided to close your business or if it looks like it’s not able to continue in its current circumstances then get in touch with us – for free – for a friendly but honest chat. 

We’ll explore your situation in a bit more detail so we can explain what options you’ve got and what has the most realistic chance of success. 

Whether it’s dissolution, liquidation or another process you might not have considered, we’ll tell you what you can do – then you can choose what’s best for you and your business.