Active Proposal to strike off is a notification that Companies House will put on a company’s overview file when it is either subject to compulsory strike-off or voluntary strike-off.
To close down a company there are a number of procedures available to company directors, one of which is the strike-off process.
The two primary mechanisms available are either strike-off, which is the effective dissolution of the company without going into liquidation or either going into insolvent liquidation or solvent liquidation before being dissolved by Companies House.
The strike-off procedure, when triggered by Companies House itself, will result from the failure to file documents annually that are required, such as annual accounts, confirmation statement or not having an active director. This is called compulsory strike off.
The failure to file both annually will usually be a criminal offence. However, it seems that to incentivise company directors to do so it typically relies upon the compulsory strike-off procedure instead. Notwithstanding that position, it is possible for criminal proceedings to be brought against company officers who fail to comply with the filing requirements for accounts and a confirmation statement and for fines to be levied as well.
In many instances, however, if a company director promptly upon notice of compulsory striking off being initiated by Companies House, then corrects the position by filing either the accounts or confirmation statement (whichever document has not been filed), in many instances that can be the end of the matter. However, until the matter is corrected, the company will be shown as being in a position of active proposal to strike off.
Voluntary strike-off instead is initiated by company directors, not by Companies House, but the notification of the active proposal to strike-off will nevertheless appear in much the same way.
The difference is the directors have initiated the procedure by filing a Form DS01 to strike off a company at Companies House, declaring that they have complied with the mandatory statutory requirements that enable them to apply for a voluntary striking off and complying with the relevant procedures.
If a company has assets these should be dealt with before any application for voluntary striking off.
Furthermore, in the event a compulsory strike-off procedure is initiated by Companies House, it is important to file the relevant documents promptly to avoid the company being dissolved and the remaining assets becoming bona vacantia, defaulting to the Crown. It that happens the assets will no longer be readily available to the shareholders of the company.
Shareholders who wish to recover those assets from a dissolved company will have to make an application for its restoration to the register, which can be an expensive legal procedure.
However, it may be beneficial to a company’s shareholders if the assets are in excess of £25,000 for the company to be liquidated as a solvent liquidation through the procedure known as Members Voluntary Liquidation.
This enables the assets of the company to be dealt with by a liquidator and can be a tax efficient mechanism for the company’s shareholders who may be able to take advantage of Business Asset Disposal.
If, however, the company is insolvent, then the Members Voluntary Liquidation procedure will be unavailable. In addition, the voluntary strike-off procedure using the DS01 Form may be unsuitable and creditors may object to the striking-off process being adopted.
Instead, it may be appropriate for the company to be placed into Creditors Voluntary Liquidation for an orderly winding up to be undertaken in the interests of the creditors. That procedure can be initiated by a company director but as with a Members Voluntary Liquidation, it needs to be undertaken by a licensed insolvency practitioner who can be appointed as Liquidator.
Alternatively, it is possible for a company to be liquidated through a procedure known as Compulsory Liquidation in which a petition is lodged with the Court. This can either be initiated by directors but more commonly it will be undertaken at the direction of unpaid creditors owed money by the company.
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