A compulsory strike-off is often a stressful experience for business owners. There is a lot to be done, and precious little time in which to do it. Taking too long can land business owners in hot water. Leading to the forced closing of a company and potential penalties for directors. To ensure the process goes as smoothly as possible, it’s vital to know the compulsory strike-off process in detail.
One of the most important parts of the compulsory strike-off process is publishing notices in the Gazette. This makes public the intention to close a company, allowing parties to lodge objections to the process. As such, understanding how Gazette notices work is crucial for getting a desirable outcome. In this article, Clarke Bell will be discussing exactly how the first Gazette notice works for a compulsory strike-off. The wider process, and how you can react.
What is a compulsory strike-off?
A compulsory strike-off, also known as compulsory dissolution, is a process of closing a company initiated by the Companies House. It is typically initiated to close companies that have failed to submit their annual accounts. However, it is also used to close companies that breach Companies Act 2006 regulations.
Once the Companies House has decided to pursue a compulsory strike-off against a company, it will first attempt to contact company directors. Usually, two letters will be sent. Stating that the company in question is in breach of regulations or requesting company accounts be sent. If there is no response to these letters, the Companies House will assume that the company is no longer operational, and will begin the compulsory strike-off process. At this stage, the first Gazette notice will be posted.
What is a first Gazette notice for compulsory strike-off?
Publishing a notice in the Gazette announces to the public that a company will be struck off from the Companies House register. The notice opens a three-month window where directors or third parties can object to the closing. If no objection is made within this time, the company will be closed.
Companies can also be struck off the Companies House’s register voluntarily. For a variety of reasons, directors of solvent companies can apply for a strike-off using a DS01 form. However, if the directors of an insolvent company attempt a strike-off, they can expect the process to be halted by their company’s creditors. In this case, the company will likely be forced into a compulsory liquidation, with extracted funds going to repay creditors. If, in the unlikely scenario that an insolvent company is able to conduct a strike-off, creditors can petition the courts to reinstate it. Once reinstated, the company will be liquidated to satisfy the needs of creditors, and directors may be investigated for misconduct. Regardless of the scenario, a notice will be posted in the Gazette, making the situation public knowledge.
What can be done if your company receives a first Gazette notice for a compulsory strike-off?
If your company has received a notice of the Companies House’s intention to pursue a compulsory strike-off, you will have a decision to make. Depending on your preferred outcome, you will have certain options available, and so you should give it careful thought.
You might want your company to continue operating as usual. In this case, you will need to send the Companies House a suspension application. This document is a formal request to halt the compulsory strike-off process. If successful, this will allow your company to remain open. In addition to making this application, you will need to remedy whatever problem led the Companies House to pursue a compulsory strike-off. In most cases, this is a quick fix of sending up-to-date company accounts or confirmation statements, though your scenario may require other action. Once the Companies House has received this, you need only await confirmation that the compulsory strike-off has been dropped.
Allow your company to be closed
If your company no longer serves your interests, you could instead allow it to be closed. In this case, all you need to do is let the compulsory strike-off process complete, and your company will be closed. As we have mentioned, this is not an option for insolvent companies. If pursued, it is more likely to land directors of insolvent companies in trouble than anything else. If your company is insolvent, you should instead consider other options. A Creditors’ Voluntary Liquidation (CVL) is an ideal method of closing an insolvent company. Whichever course of action you choose, you should act quickly. Otherwise, you risk a third party taking the initiative.
If your company is insolvent, and your creditors don’t have faith you can repay them, they may petition the Companies House to enforce a compulsory strike-off. As we have mentioned, this will result in your company closing, liquidation of assets to repay creditors, and possibly an investigation into company directors. To avoid this, it is vital that you must take action before the situation gets out of hand. A CVL or a Company Voluntary Arrangement (CVA) could be just what you need.
Striking-off a company with assets
If a company is struck-off with assets or accounts still in its name, they will become “bona vacantia.” This means that your assets and accounts will be transferred to the Crown. With extracted funds going into the public purse.
To avoid losing ownership of your assets, you should ensure they are all removed from your company before it is struck off. There are two ways to do this. Firstly, you could realise the assets and extract the funds out of the company. If you would prefer to keep the assets, you could instead move the assets out of the company being struck off and into a new venture.
Regardless of which extraction method you choose, you would be best off appointing a licensed insolvency practitioner to handle the process. They will ensure everything is done in accordance with the law, and can offer professional advice on how to handle the situation best. For example, if your company has a significant well of retained profits, you may find that a Members’ Voluntary Liquidation (MVL) is the better option. This process is the most tax-efficient way to close a company, even allowing you to apply for business asset disposal relief, previously known as entrepreneurs’ relief. This ensures that you retain as much of your company’s value as possible.
Clarke Bell can help
If you’re considering closing your company, whatever the reason, then Clarke Bell can help. Our experts have been handling cases just like yours for over 27 years. We can ensure that you find the best outcome for you and your company. To find out how we can help, contact our team today.