Company Strike Off
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What is a strike off?
When you strike off – or dissolve – a company, you are informally closing it down. This could be due to the fact that the company has stopped trading, the director is seeking retirement, or because the director has lost enthusiasm for running the business.
Worried about your Strike Off?
If you are worried about how you are going to deal with your strike off, we’re here to help you! There are many people who will find themselves having to deal with a strike off. Here at Business Helpline, we can discuss all of your options and help you plan for a better future.
Call our team today on 0800 088 2142.
When can you strike off your company?
If you strike off your company from the Company Register, you have to pass a number of hoops. These hoops will mean that your business:
▪️ hasn’t traded or sold off any stock for the past 3 months
▪️ hasn’t changed names over the past 3 months
▪️ isn’t under threat of liquidation
▪️ has no creditor agreements such as a Company Voluntary Liquidation (CVA)
If your company passes through all of the bullet points mentioned, you should be able to apply for your company to be struck off.
What happens when you're closing down a company?
Before applying to strike off your limited company, you must close it down legally. This involves:
▪️ Announcing your plans to interested parties and HM Revenue and Customs (HMRC)
▪️ Making sure your employees are treated according to the rules
▪️ Dealing with your business assets and accounts
When your company is dissolved, all the remaining assets will pass to the Crown (including any bank balances).
Who do I have to tell?
Fill in an application to strike off and send a copy within 7 days to anyone who could be affected. This includes:
▪️ members (usually the shareholders)
▪️ managers or trustees of any employee pension fund
▪️ any directors who didn’t sign the application form
What is a DS01 form?
The DS01 form is a piece of paper that is used to formally dissolve or strike-off a company that is no longer wanted. It will remove the company name from the Companies House register, meaning that it no longer exists legally.
What are my strike off options?
You might find that your request has been blocked if you have made the decision to strike your company off by submitting the DS01 form to Companies House. This is usually because you have outstanding creditors who are set to lose the money that they are owed from your company, if your company is struck off and taken off the register. It could be a supplier chasing an unpaid invoice or HRMC looking to gather unpaid tax. Companies have two months to oppose your strike off, following your initial application. Your company will remain active if Companies House verifies these objections, and your strike off will of course be suspended.
Your 4 options
1. Submit your application again
You can hope that it’s second time lucky for you and your application. There is the possibility that your application could squeeze through this time around but it won’t necessarily be that easy. After all, your creditors could be aware of your intention to strike off your company and they will be ready to launch an opposition to this.
2. Pay off your creditor
If a small outstanding debt is the stumbling block, you could simply pay off that debt. There is no reason for your company strike-off to be rejected if you have paid back everything that you owe.
3. Show caution with multiple creditors
You cannot simply go ahead with option 2 if you have multiple creditors who you owe money to. If you can pay all of them off then fair enough, however, you should not attempt to pay some of them off without paying others off as well. This can look like you are prioritising creditors and this is seen as a wrongful form of trading.
4. Enter a Creditors Voluntary Liquidation (CVL)
A CVL will allow an insolvency practitioner to manage the affairs of your company before closing it down. Assets within the company will be liquidated and ratioed out to outstanding creditors in a fair manner. Outstanding debts on top of that will be written off during the process.
A licensed insolvency practitioner is needed to make sure that the company is closed down in a correct and proper way. You do not have to worry about liquidation after petitioning for your company to be reinstated. Instead, you can be clear that the company has been shut down formerly and you can move forward.
How do I place my company into a CVL?
A CVL can only be created under the assistance of a licensed Insolvency Practitioner (IP). An IP will be able to help you with good advice that you need to sort out your financial situation.
A CVL can only be entered into under the guidance of a licensed Insolvency Practitioner. An Insolvency Practitioner will be able to give you the sound, practical advice you need when dealing with a distressed company and you are highly encouraged to speak to one at the earliest signs of insolvency. They will be able to discuss the various options available to you and your company which may involve rescue and restructuring procedures such as Administration or a CVA.
Get in touch
If you are unsure whether refinancing this pathway will be right for you, don’t hesitate in contacting us.
Call one of our compassionate experts at 0800 088 2142.
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Creditors Voluntary Liquidation FAQs
It takes 14 days to put a company into a CVL, following the date it has been agreed. If 90% of shareholders agree to a short notice, liquidation can happen in half of that time (7 days). 7 days is the minimum statutory notice period to creditors.
1. Meeting of Board Directors and Sole Director
Once the directors have met and discussed the situation with a Licenced Insolvency Practitioner, they will have to meet and work out what is best for the good of the business – sorting out the finer details of what is going to take place.
2. Shareholder and Creditor Communication
Shareholders and creditors will both be affected by decisions that are made in the previous point. Any decisions on the future of the business are of course going to affect its investors; they will also affect creditors, who will be easier to see how and when they will start to be repaid.
3. Liquidation Begins
The general meeting of shareholders and the decisions of the relevant creditors will usually happen on the same day. 75% of shareholders must agree to liquidation if the company is to be wound up.
There is no longer a requirement to hold a creditors meeting in-person, as per the pandemic, unless it is requested by 10% of creditors in value or number, or simply by 10 creditors. Liquidation would ordinarily commence at 23:59 on the Decision Date, if the appointment of liquidators was approved. This can be done remotely with directors.
4. Process of Liquidation
The Insolvency Practitioner will continue to communicate with creditors during the liquidation of the company, resolving any issues regarding creditor claims and taking the necessary action to fix them. They would have to realise the company assets so that they can be used and distributed across outstanding creditors.
Assets will be independently valued, marketed, and sold to gain capital. A director of the insolvent company could purchase some of these company assets but they could only do so if negotiated through the IP.
There is a set order of priority of whose needs are to be met first, as noted in the Insolvency Act 1986.
Directors of insolvent companies have legal responsibilities to fill. A key obligation, once you know that your business is in an insolvent position, is to prioritise the needs of your creditors above everybody else. This means putting those who you owe money ahead of fellow directors and shareholders.
This means you should not be getting involved in anything that could worsen the position of your creditors. You must avoid adding to their financial losses. That means you must stop trading straight away because this could affect the position of your creditor in a negative sense. However, there are some ways that a company could continue to trade as an insolvent company, if you are able to prove that your work would be of benefit to creditors. This can be rather complex, though, so it makes sense to cross-check any scenario like this with a qualified insolvency practitioner.
Putting your company into a CVL one you know that it’s insolvent is illustrating your desire to protect those creditors. This is good as it shows you are acting as you should according to your legal duties.
Placing a struggling company into liquidation can also be a massive relief. If you have been dealing with angry creditors and customers worried about their future then this could be the best solution for you. After going into a CVL, any unpaid debt, that isn’t personally guaranteed, will be written off. Creditors will no longer be able to chase you personally for outstanding money. Upon entering a CVL, employees will also be allowed to receive redundancy pay – if they qualify for it.
A CLV cannot be reversed once it has been started. Directors of a closed company are able to purchase assets of the business that has gone into the CVL. This could be stock, premises, or the name of the business itself.
Following completion of the Creditors Voluntary Liquidation, the company will cease to exist as it will have been struck off the Company House register. Unpaid liabilities will be written off unless they were personally guaranteed.
Throughout liquidation, the liquidator must investigate any actions taken by directors and former directors within the last three years. If they do not do this properly, they could be found guilty of wrongful trading, fraud, or misfeasance. Such an act could result in directors being made personally liable for some or all of the company’s debts; they might also be disqualified from being the director of any company for up to 15 years. Nonetheless, such instances are very rare and directors are usually able to move on to a new business venture if they wish to do that.
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