Can You Strike Off A Company With Debts?

Yes, it is possible to strike off a company with debts. However, the use of the voluntary strike off of a limited company procedure to close and dissolve a company with debts may not work, and the company may still need to go into liquidation.

Is It Legal To Strike Off A Company With Debts?

It can be legal to attempt to strike off a company which is insolvent with debts under Section 1003 of the Companies Act 2006. 

There is nothing in Section 1003 of the Companies Act 2006 itself that prevents a company with debts from using DS01 form to strike off a company without first going into liquidation. 

There are other restrictions before voluntary strike off can be used, which relate to a company with debts.

Restrictions On Companies With Debts Being Voluntarily Struck Off

There are restrictions on companies with debts being voluntarily struck off when:

• A company voluntary arrangement (CVA) has been proposed.
• A company is in administration.
• It is being wound up and placed into either creditors voluntary liquidation (CVL) or compulsory liquidation.
• An application to the Court has been made for a Part 26A Companies Act 2006 restructuring plan. 

What Can Go Wrong Attempting To Strike Off A Company With Debts?

Notwithstanding that it can be legally permissible to strike off a company with debts, the procedure can still go wrong or be ineffective.

Under Section 1006 of the Companies Act 2006 an application for voluntary strike off must, within 7 days of being issued to Companies House provide a copy of it to all members, employees, creditors and directors of the company.

It is not uncommon for creditors such as HMRC, a lender of a Bounce Back Loan or indeed any creditor to lodge an objection to striking off a company under their statutory rights in Section 1003(3)(b) of the Companies Act 2006. This can then stall the process for at least six months and in some cases years if objections are renewed and Companies House is satisfied that they are valid. 

During that period, even though the company state may be listed at Companies House as active proposal to strike off, the directors still have a mandatory duty to file annual accounts and confirmation statements. Failure to file accounts at Companies House on time and confirmation statements is a criminal offence and can lead to a fine.

CVL To Close A Company With Debts

Unlike striking off a company with debts, directors can instead opt for creditors voluntary liquidation (CVL) to close an insolvent company with debts. 

Unlike the voluntary strike of a company with debts, where creditors can object, a CVL is without such restrictions, provided the special resolution for voluntary liquidation can be passed by 75% or more of the members and a liquidator has been found who is willing to act. At Oliver Elliot, we can assist with such matters, so get in touch for a free initial consultation to discuss your case.