If you are looking to cease trading and close down your company, depending on your circumstances you may have a number of options open to you. One of these is applying to voluntarily strike off your company from the register at Companies House. Strike off – also known as company dissolution – is only available to companies which are solvent, meaning they have no outstanding debt to creditors and are fully up to date with their tax and accounting liabilities.
Striking off may seem like an attractive option as not only is it a relatively quick process, but the financial outlay is often significantly less than opting for a full liquidation of the company. However there is a major downside to striking off which needs to be carefully considered before you commit to this course of action.
By opting for strike off you are forgoing the statutory entitlements that you have built up during the years of running your company. This includes redundancy pay, and other funds that may be available such as holiday pay, notice pay and any unpaid salary. If you have been running your company for a number of years this could add up to a significant amount of money, which could potentially eclipse the cost of the liquidation. In fact the average amount claimed by directors is £12,000 whilst the average fee for company liquidation is around £5,000.
At a time when you may be fretting over your financial future having lost not only the company you have worked so hard for, but also your livelihood at the same time, a redundancy payout could make a massive difference in helping you get back on your feet and start planning for the future. It is important to note that if you own the company jointly, the other directors may also be eligible to claim their own entitlements.
Not only do you forfeit your statutory entitlements by opting for strike-off, you are also taking on full responsibility for ensuring the correct procedure has been followed to bring your company to a close. Even once the company is dissolved, it could still be restored to the register if you have closed it down without fully repaying all your creditors and they challenge it. By opting for liquidation you are protecting yourself by placing the whole process in the hands of trained and experienced professionals who will ensure everything is done ‘by the book’ and you can rest assured that your company is brought to a complete closure in the correct way.
Once your company is liquidated, redundancy money is paid from a government fund known as the Redundancy Payments Service (RPS). This has been set up specifically to help those affected with losing their jobs following company insolvency. As a company director, you are also an employee and therefore have a right to claim. Remember, if you chose to strike off your company rather than going down the route of liquidation, you give up your right to claim redundancy and other statutory entitlements. Don’t strike off your company without speaking to us first!