We are often asked by clients for advice on how to close a company using what is known as the ‘striking off’ procedure under the Companies Act 2006
‘Striking off’ is generally a cost effective way to dissolve, or close a company, in other words to remove it from the Register of Companies at Companies House. Once removed the company ceases to exist.
There may be a number of reasons why a company is no longer required – the company may be dormant or no longer trading, the directors may be retiring or the company may have been set up for a specific purpose which is no longer relevant.
The striking off procedure only applies in certain circumstances and only companies that are solvent can be dissolved – companies with liabilities or with assets worth more than £25K will need to consider alternative routes such as voluntary liquidation.
Voluntary v compulsory strike-off
Essentially there are two ways in which a company can be struck off:
- the directors make an application to Companies House to dissolve the company, known as a voluntary strike-off; or
- Companies House itself takes steps to remove the company from the Register, in other words a compulsory strike-off.
Part 31 of Companies Act 206 deals with the voluntary application. This is a relatively straightforward procedure provided that certain conditions are met, for example the company has not traded within the previous 3 months, changed its name or disposed of any property for value within that period.
It is however important to note that the company must settle all outstanding debts and liabilities before it can proceed with a voluntary application.
If the relevant conditions are met, the directors may then make a formal application to Companies House. The application is straightforward and inexpensive:
- submission of form DS01 and payment of the £10 filing fee
- the directors must send a copy of the form to all shareholders, employees and potential creditors
- upon receipt of the application, Companies House will publish a notice in the Gazette, the official journal of public record, and a period of at least 2 months must lapse in which objections to the strike off can be made
- if no objections are forthcoming, the company will be formally dissolved on publication of a final notice in the Gazette
There are certain practical matters that must not be overlooked, in particular HMRC must be notified and the company should deregister for VAT and PAYE if relevant – our tax team can of course assist you with this.
Most importantly, the directors must transfer all assets out of the company and close the company bank account. This is crucial as any assets left in the company on dissolution pass immediately to the Crown as ‘bona vacantia’ and once transferred it is difficult to recover these assets. We will look at the implications of this in a separate article, and will highlight the case of a company which inadvertently lost a significant amount of money to the Crown.
Compulsory strike off
There are certain circumstances in which Companies House itself will instigate a strike off under s1000 of the Companies Act 2006. This is predominantly when a company has failed to fulfil its statutory requirements under the Act, for example filing the statutory accounts or its annual confirmation statement.
Under such circumstances, Companies House will always send out warning notices to the directors via the registered office. If these are not complied with within a specified period, the Registrar will issue a notice in the Gazette and commence striking off. Again creditors have a minimum 2 month period within which to object. This could include HMRC, who may lodge an objection on the basis of unpaid tax liabilities. In the event of dissolution, any assets left in the company will pass as bona vacantia. Directors should note that restoring a company in order to recover lost assets can be a lengthy and costly procedure.