Overview Compulsory Strike Off?
Companies need procedures that enable them to be wound up if they have reached the end of their lifespan but in circumstances when they are not legally compliant there is what is known as a compulsory strike off process that operates to encourage them back into line.
Compulsory Strike Off is a legal procedure initiated by the Registrar of Companies when a company fails to fulfill its statutory obligations. These obligations typically include the timely submission of annual accounts, confirmation statements, and other relevant documents to the Companies House. It is also used when a company is no longer trading.
How Does Compulsory Strike Off Work?
The process of Compulsory Strike Off begins with the Registrar issuing a notice to the company’s registered office address, indicating their intention to strike off the company from the register. Simultaneously, the notice is published in the Gazette. This publicises the impending strike off and allows interested parties, such as creditors and employees, to raise any objections they might have.
Compulsory strike off can have severe consequences for a company and its stakeholders:
- Loss of Legal Existence: Once struck off, the company ceases to exist as a legal entity, and its assets become the property of the Crown. This is known as Bona Vacantia.
- Inability to Trade or Access Assets: A struck-off company cannot continue its business operations or access its bank accounts and assets.
- How to Prevent Compulsory Strike Off:
To avoid the ramifications of Compulsory Strike Off, companies must take proactive steps:
- Comply with Filing Obligations: Companies should diligently submit all required documents to the Companies House within the specified deadlines. It is important to act quickly because a failure to file accounts at Companies House on time is a criminal offence.
- Maintain Communication: Ensure that the company’s registered office address is up-to-date to receive any notices or correspondence from the Registrar promptly.
- Properly Dissolve Dormant Companies: If a company is dormant and not intending to resume trading, the directors should apply for voluntary strike off rather than allowing the company to be struck off compulsorily.
What Are Your Options If Your Company Gets A Gazette First Notice Letter?
Your options will depend on what your future plans are for the company. Do you want to close the company down or do you still want the company so that you can continue trading?
Let The Company Be Wound Up
If you no longer have a need or wish to maintain the company then you can let the process of Compulsory Strike Off take its course. However, you should ensure the company has paid all of its debts before looking to distribute its assets to shareholders. Dissolution is not a process to use when a company has debts.
In the event that this is not done then it is likely a creditor will object to the company being struck off and issue a Winding Up Petition for it to go into Compulsory Liquidation. If however the company were to go into Liquidation before a creditor objects they could still apply for it to be reinstated and then placed into Liquidation. If this were to happen then upon it going back onto the register at Companies House it is likely an investigation would be undertaken by the Official Receiver (the Liquidator of first instance) and if misconduct is discovered the consequences for the offending Directors could be serious such as Director Disqualification Proceedings.
Suspend The Striking Off Procedure
If you wish for the company to continue then you could apply to Companies House to suspend the Compulsory Striking Off procedure. You will however need to act quickly.
This will give you told to comply with the filing failure that caused the procedure to start in the first place such as filing outstanding accounts or a confirmation statement.
Once the filing failure has been rectified then Companies House will release the company from the strike off threat and it can carry on normally.
What Are The Consequences Of A Compulsory Strike Off?
The consequences of a Compulsory Strike Off can be severe for a company. A failure to deal with the process in good time can lead to the company being struck off the register at Companies House even if it is still trading.
Once struck off the company in effect no longer exists and cannot deal with any of its assets or trade without being reinstated. Reinstatement of a struck off company can be an expensive and time consuming procedure during which the company cannot trade so it is important to take advice at the earliest opportunity.
What If The Company Is Insolvent?
If the company is insolvent because it is unable to pay its debts when they fall due then relying on the effects of the Compulsory Strike Off procedure is not a way to deal with the company’s problems.
The Insolvency Act 1986 has a useful procedure to deal with such matters known as Creditors Voluntary Liquidation. This will enable a Director to organise an orderly winding up of a company using the skills and services of an Insolvency Practitioner. At Oliver Elliot we can assist you with such a process as we are full licensed and authorised to take such Liquidation appointments.
