If, as a director of a company, you and the other directors wish to close down the company, then formal dissolution procedures can be started, otherwise known as a company strike off.
If you decide to enact this procedure it will mean enacting a voluntary strike off to remove your company from the Companies Register, which you will need to apply for at Companies House using a DS01 form.
The process should be straightforward and smooth, if all the rules are followed correctly. However, your company must be solvent and have no debts outstanding, in order for this to be a viable option. Otherwise the company dissolution will be rejected.
What are the reasons for a company dissolution rejection?
Once the DS01 form has been completed and details have been checked by Companies House, a notice will be published in the Gazette, which will be a notification of your company’s intention to strike-off. Any interested parties will then be able to raise objections to the dissolution which, if valid, could suspend proceedings until further investigations have taken place.
There are many reasons why a third party may object to the dissolution. However, the most common reason is when HMRC suspect your company has unpaid tax liabilities, like corporation tax or VAT.
Other reasons for objections include:
- Unpaid bills to creditors.
- If your company has traded or changed its name in the last 3 months.
- If your company is engaged in legal proceedings with an interested party who is taking action to recover any debt owed.
- If you didn’t inform an interested party of your application to begin a company dissolution.
What can you do if it is rejected?
If a strike-off is rejected, you as a director will be sent a letter stating the reason for the rejection. It will be sent from Companies House or from HMRC, if HMRC believes there are outstanding liabilities.
Once you receive this letter, you and the other directors of your company must either comply with the demands or make any outstanding payments straight away. However, you will have the option to lodge an objection, by contacting Companies House or HMRC.
If you do intend on paying off HMRC or any other creditors, ensure that when you arrange for the funds to do this, it isn’t viewed as your company is trading – as this could lead to your application for dissolution being denied.
When receiving a rejection due to your company holding outstanding debts, if these can’t be paid, then your company will be ‘insolvent’. In this situation, you should speak to an Insolvency Practitioner who will advise you on the best thing for you to do now.
The best course of action is likely to be a Creditors’ Voluntary Liquidation (CVL). This will ensure your company is formally liquidated, while acknowledging all your duties as a director to your creditors and dealing with all the business debts of the company.
Here to help
Clarke Bell have more than 28 years’ experience as Insolvency Practitioners. In that time, we have helped thousands of company directors to deal with their business debts through the liquidation process.
If a CVL isn’t the best option for you, we will tell you what is.
You can have free and confidential advice from our team of experts by calling us on 0161 907 4044 or emailing [email protected]