What, Why, How: Striking Off a Limited Company

9 November 2020

What, Why, How: Striking Off a Limited Company

What is Striking Off for a Limited Company?

The term ‘Striking Off’ means removing. In the case of companies, simply removing the limited company from the Companies House Register. It is also known as ‘dissolving’.

You can apply to have a limited company struck off the Companies House Register, so long:

  • The business has not traded for at least three months
  • The business is solvent
  • There are no outstanding legal actions against the business
  • Its name has not been changed in the last three months
  • No creditor agreements are undergone i.e. Company Voluntary Arrangement
  • The company, in the last three months has disposed for value of property or rights that it held for disposal or gain in the normal course of business
  • No outstanding debts remain

Why would I want to do this?

Being struck off is not the same as being wound up or put into liquidation; it is rather a more cost-effective alternative.

It means the company no longer exits. It can no longer trade, make payments or sell assets.

During the process, directors remain in full control of the business. Creditors must be repaid prior closing but a formal creditors’ meeting is not necessary.

How to go about this - the striking off process:

  1. Submit a DS01 form to Companies House. Along with this you will need to send a Declaration of Solvency. Note: there will be a small filing fee (£10 cheque addressed to Companies House) involved and the documents should be signed by all directors.
  2. A notice is published in the Gazette (Belfast, Scotland or London – location dependent) to give any interested parties three months’ notice of the companies’ intentions. All creditors will also need to be informed, within a week of submitting the application form.
  3. So long there are no objections, Companies House will send acknowledgement by post that the submission has been accepted and successful.
  4. Now the business ceases to exist. This means the company name will be free for other people to use. No further business activities can be engaged in – if such activities are engaged in, legal repercussions arise i.e. personal liability, directorship ban. The existence of the company on Companies House Register is removed.
  5. Any leftover cash or assets will have ownership transferred to the Crown by a process known as Bona Vacantia.

Note: up until 20 years later, if HMRC think that the company has been struck off as a means of avoiding tax, the company will be reinstated.

What to do prior?

  • Pay any tax liabilities due to HMRC
  • Pay any outstanding amounts to creditors and settle any debts
  • Ask HMRC to end the company pay roll scheme
  • Shut the company bank accounts
  • Transfer any website domains
  • Bring any utilities or monthly services to an end
  • Deregister for VAT
  • Collect any monies due
  • Complete all outstanding work
  • Make staff redundant and pay any final wages or entitlements i.e. holiday
  • Sell company assets and distribute proceeds among shareholders
  • Prepare any final accounts and a tax return for HMRC and Companies House. Clearly state when sending that these are the final accounts
  • Inform all directors and shareholders and get their agreement

Voluntary v Compulsory

Striking off can be both voluntary or compulsory. We explore both below:

Voluntary

If a director decides they no longer have a use for the company then they can strike off the company. Reasons for striking off the company in this sense may be due to:

  • Retirement of the business owner and having no one from the family or existing management team to take their place
  • Taking on a new challenge; perhaps the business owner wants a new focus
  • A method of reorganisation
  • Lacking profitability to grow and/or develop the business further
  • Conflict among directors
  • Competitive challenges upcoming which are not sustainable

Compulsory

This is when the need for a company to be struck off is from a third party. Usually Companies House are the third party, making the request due to non-compliance of filing accounts or annual statements. The request may be known, ‘an active proposal to strike off’.

Under the Companies Act 2006, Companies House must send at least two late payment notices to the companies registered address first. If there are not responded to then a Strike of Notice will be shared in the Gazette.

For directors, consequences arise from a compulsory strike off:

  • Banks not willing to provide further finance
  • Future customer/supplier contracts at risk
  • The company ceases to exist
  • All assets become property of the Crown
  • May be disqualified from acting as a director for up to 15 years
  • May be held personally liable for company debts

Can a struck off company be restored?

You can restore your struck off company using a RT01 form. You must be the director or a shareholder of the company when it was dissolved, the business must have been trading when it was struck off and the application must be made within six months of the dissolution date. Note: a creditor can restore a company! If they had an outstanding debt, they can restore the company via a court order so that their debt can be paid.

What if my company is dormant?

If you have a dormant company i.e. one that is registered with Companies House but has never generated income or carried out any trading activities, you can be struck off. For this, you must:

  • File annual returns and dormant accounts
  • Keep records up to date
  • Report any changes to the registered company details
  • Inform the local corporation tax office about the company being dormant, as soon as possible.

In this case, A DS01 form can be used in the same way as a limited company.

So…now you know what it means to strike off a company. If it is something you are interested in and/or want further advice on doing, contact our expert advisers.

Please also visit www.dissolvemycompany for our digital dissolution pack including a 25 page guide to help you through the whole process.

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