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What is a compulsory strike-off for a limited company?

Posted on: Monday 13th May, 2019

What is a compulsory strike-off for a limited company?

When a limited company is forcibly struck off, it is removed from the register at Companies House and ceases to exist as a business entity. Compulsory strike-off typically occurs for reasons of non-compliance, and the process is also known as dissolution.

When the situation is such that an external party, commonly Companies House, petitions for the company’s forcible removal from the register the ramifications for directors can be serious, but there is another option that offers some benefits to both creditors and directors if the company is insolvent.

Why does compulsory strike-off occur?

Compulsory dissolution is generally the result of repeated failings to file a company’s annual accounts and/or confirmation statement. In some cases, not notifying Companies House of a change in registered address can also result in compulsory strike-off, but they must have reasonable grounds for believing the company is no longer trading.

If a company has suffered a downturn and is approaching insolvency, directors’ failure to submit annual accounts may be a symptom of its general decline. In this case, if the business is insolvent, it’s important to know that any form of dissolution or strike-off is inadvisable as directors won’t be able to claim redundancy pay and other entitlements.

What are the consequences of company strike-off?

Compulsory strike-off has a number of potentially serious consequences for directors, including:

  • Undistributed assets of the company becoming the property of the Crown – known as ‘bona vacantia’
  • Inability to secure finance to rescue the situation
  • Potential disqualification for directors, for a period of up to 15 years
  • Potential personal liability for directors and shareholders if they’re unaware of the action by Companies House, or continue to trade regardless

Appealing against compulsory dissolution

It’s imperative to act quickly if your company is in danger of compulsory strike-off. You can apply to Companies House to stop the dissolution process, and depending on their reasons for wanting to strike-off your company you may need to file the accounts/confirmation statements that are overdue.

If the company has already been dissolved you can apply to have it restored to the register at Companies House, via form RT01, or by court order depending on individual circumstances.

Voluntary liquidation and director redundancy

If your company is insolvent, you may benefit from entering voluntary liquidation rather than waiting to be forcibly struck-off. Creditors’ Voluntary Liquidation (CVL) is administered by a licensed insolvency practitioner (IP) who determines whether you’re eligible for statutory redundancy pay and other entitlements.

Essentially, if you have worked under a written contract of employment for two years or more, and worked a minimum of 16 hours per week in a role that is more than just advisory, you may be able to claim redundancy in the same way as other employees.

For unbiased professional advice on director redundancy, and how to avoid compulsory strike-off, call one of our expert team at Redundancy Claims UK for a free same-day consultation.

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