What does Striking Off or Dissolving a Company Mean?

Difference Between Liquidating and Striking Off a Company

Liquidation, often seen as a more comprehensive and structured approach, involves the systematic winding up of a company’s affairs. This process includes selling off assets, settling debts with creditors, and distributing any remaining assets among shareholders.

It’s typically pursued when a company has significant assets or liabilities and requires a formal procedure to ensure all parties are fairly treated.

Striking off, on the other hand, is a simpler and less costly process. It’s ideal for companies that have ceased operations and have no significant assets or liabilities to address.

This route involves applying to the Companies House to have the company’s name removed from the register. It is a straightforward administrative process, often used by companies that are dormant or have completed their purpose.

Eligibility Criteria for Striking Off Your Company

To determine if your company is eligible for striking off, consider the following criteria:

• No Trading or Change in Company Name: The company must not have traded or changed its name within the last three months.
• No Disposal of Property or Rights: There should be no disposal of property or rights needed for future trading.
• No Threat of Liquidation: The company must not be under threat of liquidation.
• No Agreements with Creditors: There must be no arrangements with creditors, such as a Company Voluntary Arrangement (CVA).
• Settlement of Debts:All debts of the company must be paid or settled.
• No Legal Proceedings: The company should not be involved in any legal proceedings, either in the UK or abroad.
• Employee Status: The company must not have employed any staff in the last three months.
• Shareholder Approval: There must be consent from the majority of the company’s shareholders.
• No Outstanding Statutory Obligations:The company must have met all statutory filing obligations, such as submitting annual accounts and tax returns.

Advantages and Disadvantages of Striking Off a Limited Company

Disadvantages:

• Personal liability for company debts if the process is misused.
• Loss of control over the disposal of company assets.
• Potential impact on personal credit ratings.

Advantages:

• Simplicity and cost-effectiveness.
• Quick closure for businesses with no debts.
• No requirement for formal liquidation.

Alternatives to Dissolving Through the Strike Off Process

• Liquidation: A formal process, ideal for companies with significant debts or assets.
• Company Voluntary Arrangement (CVA): An agreement with creditors to pay debts over time.
• Administration: A temporary measure providing protection while seeking recovery options.

What Happens After My Company Has Been Dissolved?

After the dissolution of a company, it ceases to exist as a legal entity. This means it can no longer engage in business activities, enter contracts, incur debts, or maintain a bank account. The directors and shareholders no longer have any rights associated with the company.

One significant consequence is the handling of the company’s remaining assets. Any assets that were not properly dealt with before the dissolution automatically pass to the Crown (the government) under the bona vacantia rules.

The dissolution also terminates all employment contracts, and any outstanding employment claims may become void. However, legal responsibilities incurred by the directors prior to the dissolution, such as personal guarantees for loans, will still remain.

Can HMRC Chase a Dissolved Company?

Yes, HM Revenue & Customs (HMRC) retains the right to pursue a dissolved company if there are indications of financial misconduct or unpaid taxes. HMRC can investigate the company’s activities prior to its dissolution and can take action against former directors personally if wrongdoing is discovered.

Furthermore, if HMRC believes that a company has been dissolved without settling its tax liabilities, it can apply to the court to have the company restored to the register. This reinstatement allows HMRC to pursue outstanding tax debts.

Can You Reinstate a Dissolved Company?

Reinstating a dissolved company is possible but involves a legal process. An application for administrative restoration must be made to the court, and this can be initiated by former directors or members who had a vested interest in the company. The court will consider various factors, such as the reason for dissolution and the purpose of reinstatement.