Company Strike Off vs Liquidation: Which Is Right for Your Company?

Company strike off, also known as dissolution, removes a limited company from the Companies House register.

Once dissolved, the company legally ceases to exist. It can no longer trade, own property, enter into contracts or operate a bank account.

Strike off is usually considered where:

• The company has stopped trading
• It no longer serves a purpose
• Its debts and tax affairs have been dealt with
• Employees have been paid
• Assets have been distributed or transferred
• There are no unresolved creditor disputes
• The company is not subject to insolvency proceedings

Directors apply using a DS01 form. A majority of the company’s current directors must approve the application.

Companies House will publish notice of the proposed dissolution in The Gazette. Creditors and other interested parties are then given an opportunity to object.

For a broader explanation of the process, read our company strike-off guide.

This is the most important question when choosing between strike off and liquidation.

A company may be insolvent if:

• It cannot pay bills as they fall due
• Its liabilities exceed its assets
• HMRC arrears continue to increase
• Suppliers are taking legal action
• The company relies on new borrowing to meet existing debts
• A winding-up petition has been threatened or presented

If the company cannot pay its debts, strike off is unlikely to provide a safe or reliable closure route.

Creditors, including HMRC, can object to the proposed dissolution. Even after dissolution, an interested party may sometimes apply to restore the company to the register. Companies House makes clear that strike off is not an alternative to formal insolvency proceedings.

Where the company is insolvent, a CVL is normally the more appropriate voluntary option.

Strike off and CVL are both used to close companies, but they deal with very different financial circumstances.

A CVL will usually be more appropriate where:

• The company cannot pay HMRC
• Suppliers or lenders are owed money
• Employees have unpaid claims
• Company assets need to be sold
• Creditors are threatening legal action
• A winding-up petition is likely
• Directors need an orderly formal closure

For a detailed fee breakdown, read our guide to the cost of liquidating a company.

Strike off and MVL can both be used to close a solvent company.

The difference often comes down to the value left inside the business and the amount of work required to close it properly.

Strike off may be suitable where:

• The company’s affairs are simple
• Debts and taxes have been resolved
• Few assets or retained profits remain
• The directors want a low-cost closure
• No formal distribution process is required

An MVL may be suitable where:

• The company has substantial cash or assets
• Shareholders expect meaningful distributions
• Tax treatment is an important consideration
• Property or complex assets need to be dealt with
• A formal liquidator-led closure is preferable

An MVL costs more than strike off because a licensed insolvency practitioner must be appointed. However, it may produce a better overall financial result in suitable cases.

For a more detailed comparison, read our guide to Members’ Voluntary Liquidation vs strike off.

Strike off is normally the cheapest option in terms of the initial closure fee.

The Companies House application currently costs:

• £13 online
• £18 using a paper application

Liquidation involves professional fees because a licensed insolvency practitioner must manage the process.

However, cost alone should not determine the decision.

Using strike off where the company is insolvent may result in:

• Creditor objections
• Delays
• Restoration of the company
• Further enforcement action
• Continued filing obligations
• Additional professional costs later

The cheapest appropriate route depends on whether the company is solvent, what it owes and the assets it holds.

Read our guide to the cheapest way to liquidate or close a company for a wider affordability comparison.

After strike off

Strike off does not provide a formal process for dealing with unpaid creditors.

Creditors can object before dissolution and may be able to seek restoration afterwards.

Company debts do not automatically become the personal responsibility of directors simply because the company is struck off. However, directors may remain personally exposed where they have:

• Signed personal guarantees
• Taken an overdrawn director’s loan
• Received unlawful distributions
• Misused company assets
• Breached their legal duties
• Acted fraudulently

In a CVL

The liquidator agrees creditor claims and distributes available funds according to the statutory order of priority.

Where the company does not have enough assets to repay all unsecured creditors, the unpaid company balances are generally left within the liquidation rather than transferred automatically to the directors.

Personal guarantees and claims against individual directors remain separate.

In an MVL

The company must be able to pay all its debts, including interest, within 12 months.

Once creditors and liquidation costs have been dealt with, remaining funds are distributed to shareholders.

Before strike off, directors should identify and deal with all company assets.

These may include:

• Cash in bank accounts
• Property
• Vehicles
• Stock
• Equipment
• Intellectual property
• Domain names
• Money owed by customers

Assets still owned by the company when it is dissolved may pass to the Crown as Bona Vacantia.

In liquidation, the liquidator takes control of company assets and deals with them as part of the formal process.

This makes liquidation more suitable where assets are substantial, disputed or difficult to transfer.

A company liquidation does not normally damage a director’s personal credit rating simply because they held office.

The company is a separate legal entity.

However, personal credit may be affected where the director has:

• Guaranteed company borrowing
• Fallen behind with personal liabilities
• Received a personal court judgment
• Become subject to personal insolvency proceedings

The liquidation may also be visible through Companies House and other public records, but this is different from a negative entry on a personal credit file.

Choosing strike off simply because it is cheaper can create problems where the company’s affairs are not straightforward.

Potential risks include:

• HMRC or another creditor objecting
• The application being suspended
• Assets passing to the Crown
• The company being restored later
• Creditor enforcement continuing
• Further scrutiny of director conduct
• Legal or professional costs increasing

Likewise, liquidation may be unnecessarily expensive where a solvent company has no debts, assets or unresolved matters.

The correct decision should be based on the company’s full financial position rather than the headline cost.

Strike off may be appropriate where:

• The company is solvent
• Trading has stopped
• Debts have been resolved
• Taxes and filings are up to date
• Employees have been dealt with
• Assets have been distributed
• No creditor action is expected

A CVL may be appropriate where:

• The company cannot pay its debts
• HMRC or suppliers are applying pressure
• Creditors are likely to object to strike off
• Employees are owed money
• Assets need to be dealt with formally
• Directors want an orderly voluntary closure

An MVL may be appropriate where:

• The company is solvent
• Significant profits or assets remain
• All debts can be paid within 12 months
• Shareholders want a formal distribution process
• Tax treatment may make an MVL worthwhile