Why Strike Off A Dormant Company?
Sometimes a dormant company is no longer required. Perhaps the company was set up to fulfil an idea or sell a product that didn’t work or is no longer viable. It might be that the owners want to retire and can’t find anyone to take over the company from them or perhaps it’s a subsidiary that’s no longer needed or facing a large late filing penalty.
Whatever the reason, so long as certain conditions are met the directors may choose to request to strike off the company. Once struck off, the company legally no longer exists and that fact can be checked by searching against the company name at the Companies House website.
To use the strike off procedure, in the last 3 months the company must not have:
- Traded (or otherwise carried on in business)
- Sold any property or rights owned by the business which is previously sold while trading, For example, a clothes shop could not in those 3 months sell remaining clothes themselves, but it could sell the mannequins, tills, shelving and its delivery vehicle.
- Changed its name
- Engaged in any activities other than those required to dissolve the company, conclude its affairs or comply with a legal requirement. This allows a company to have sought (and paid) for professional advice in relation to dissolving the company.
In those cases, the business would have to wait the 3 months before being able to use to strike off procedure.
This procedure to strike off a company voluntarily cannot be used where the company is insolvent (i.e. cannot pay its debts). In more detail, that means:
- The company must have no outstanding liabilities – so all of its outstanding creditors must have been paid
- There must be no outstanding petition to wind up the company, insolvency proceedings or another type of order under the Insolvency Act
- There cannot be any existing agreements with creditors – e.g. a Company Voluntary Arrangement or other compromise agreement
In these cases, striking off is not appropriate and you should instead take professional advice about your obligations as a director from an appropriate professional experienced with handling insolvency situations.
What must a company do before requesting strike off?
Before embarking on the strike off procedure, there’s potentially a lot of things you’ll need to settle. While these will depend on whether your business has traded, they might include a need to:
- Follow the detailed rules if you’re making staff redundant
- Pay any staff their final wages and salary
- Prepare final accounts and a company tax return and send these to HMRC, stating that these are the final accounts and that the company will be dissolved shortly. (You won’t need to file final accounts with Companies House.)
- Pay HMRC the final balance of Corporation Tax, PAYE, NI and any other tax liabilities
- Ask HMRC to close down the company’s payroll scheme
- Deregister for VAT
- Distribute any business assets between the shareholders. Any assets not distributed are effectively abandoned, bona vacantia, to the Crown as part of voluntary strike off.
- As part of a board meeting, minute that the company has paid or will pay all of its outstanding debts or other obligations
- Close any company bank accounts
- Transfer website domain names
Who must I tell about the proposal to strike off the company?
Within 7 days of sending the application to Companies House, a copy must also be sent to interested parties. Legally, therefore, a copy should be sent to any person who is:
- A member (usually a shareholder)
- An employee
- A creditor of the company
- Any director who didn’t sign the paperwork
- The manager or trustee of any pension fund established for employees
Anyone who later, after the form is sent but before the company is dissolved, becomes a member, creditor etc must also be sent a copy of the paperwork within 7 days.
If you break these rules, you can be fined and face prosecution. It will also delay the strike off of the company, as parties who should have been informed will have the ability to object to the strike off proceeding (see below).
What happens next?
Companies House will check the paperwork and, assuming it’s acceptable, send the company acknowledgement in the post.
A notice will then be published in the London, Edinburgh or Belfast Gazette (depending on where the company is based) giving at least 2 months’ notice of the intent to strike off the company. Gazettes are the UK’s official newspapers of record, where you can view both recent and historic strike-off proposal notices.
The Gazette notice invites any interested party to make an objection as to why the company should not be struck off.
Objections to strike off – why and how?
Any interested part can make an objection to the proposal to strike off the company. Objections must be made in writing, sent to the Registrar of Companies alongside any supporting evidence (for example, copies of invoices which demonstrate that the company is still trading).
Valid reasons for objecting:
- The company has not complied with the conditions of the application to strike off. For example, it would be valid cause for objection if the company has traded or changed its name during the 3 months before the application to strike off or afterwards.
- The directors have not informed interested parties of the proposed strike off
- One or more of the declarations on paperwork is false
- The company has wrongfully traded
- The directors have committed tax fraud or another type of offence
- Action is being undertaken, or is pending, to recover money owed from the company. This might, for example, be via a winding-up petition or through the small claims court.
- Legal action of any other kind is being taken against the company
If an interested party makes an objection which is upheld by the Registrar before the 2 months has expired then the action to close the company will be suspended.
Do I still have to file a Confirmation Statement and accounts with Companies House after filing the paperwork?
No. Once, an application to strike off the company is accepted Companies House will no longer chase for these but if the striking off is aborted – see below – then they will become due again.
What can stop the company being struck off?
Before a company is struck off Companies House will check with HMRC.
If HMRC believes that there is or might be some tax due from the company they will object to the dissolution and Companies House will reject the application.
So, before progressing it may be as well to obtain advance clearance from HMRC that no tax is or might be due. If the company has never traded or been dormant for several years then HMRC are most unlikely to challenge an application for striking off and you can safely proceed without seeking prior clearance.
When will the company be struck off the register?
If there is no reason to do otherwise, the Registrar will strike off the company within about 2 months from the notice in the Gazette. At that point, a second notice will be published in the relevant Gazette and the company will no longer legally exist.
At the date of strike off, any cash or assets held by the dissolved company become the property of the Crown via bona vacantia. For this reason, it’s usually prudent to complete the distribution of the company’s remaining assets before submitting the paperwork to Companies House. In the case of dormant companies this is not usually an issue.
Can a company be restored to the company register once it has been struck off?
Usually it can. However, it is not always a simple (or cheap) process and may require a court order. It is probably best to take specialist advice that will be tailored to the particular circumstances.
Why bother striking off a company if Companies House will do it all for you?
In some cases, Companies House will beat the directors to striking off the company. Indeed, if they believe that a company is defunct i.e. no accounts or confirmation statement have been filed and post sent to the company’s registered office goes unanswered then Companies House has the right to remove such a company from the register.
There are at least two potential reasons why it may be advisable to file paperwork rather than wait for Companies House to dissolve a company:
- The possibility that it could adversely affect the director’s credit score
- If one of the directors subsequently needs professional indemnity insurance the application form may distinguish between an orderly strike off of a previous company and it being dissolved by Companies House for failing to file on time.
Most people will choose to file the paperwork and maintain control over the process of striking off the company.
We will prepare and submit the necessary documents for striking off your dormant company and manage the process from start to finish with Companies House and HMRC.
What details do we require?
We need a few basic details such as company name, company number and the webfiling authentication code.
As part of the Money Laundering Regulations, we are required to confirm the identity of new clients and we will request this once the order has been placed.
What is the authentication code?
The authentication code is the code issued by Companies House for filing company documents online and is a 6 character alphanumeric code. If you don’t have the authentication code, don’t worry, we can request it to the resent to the company’s registered office.
How long will it take?
Our standard turnaround time is 24 hours (subject to having the authentication code) to submit the initial application. After the order is placed one of our accountants reviews the details and clears any queries before starting the application at Companies House. The whole process until the company is struck takes approximately two months.
What will I receive?
Once the application has been filed and accepted at Companies House you will receive a PDF copy for your records and then a PDF copy of the final dissolution of the company.