What is a Compulsory Strike Off Action?

A compulsory strike-off is a serious matter that could result in your company losing its legal status and being unable to trade.

Do you have outstanding debts that may endanger your company assets? You should get the help of a licensed insolvency practitioner.

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The strike off application is a strict process and the insolvency practitioner can help you with handling the interest of all relevant parties. They can help you retain ownership of your limited within reasonable grounds, especially if you are having problems with company creditors.

We will discuss the main points you will need to understand when you are in need of business debt help and you have go through the strike off.

What is a Compulsory Strike Off Notice?

A compulsory strike-off means that your company, be it a limited company or not, has been formally closed and deleted from the official record at Companies House. It’s also known as dissolution, and it’s usually granted because the company in question is no longer operating or has failed to meet legal requirements and it no longer legally exist.

If a company continues to operate even after being stricken off, they can face serious consequences.

Directors who have no other use for the company and wish to close can initiate a voluntary strike-off. A third party can initiate a compulsory strike-off asking for your firm’s liquidation.

What is the Difference Between Compulsory Strike Off and Voluntary Strike Off Notice?

Voluntary dissolution occurs when a company’s management consciously decides to shut it down and remove it from the register, sometimes as a result of entering into liquidation. On the other hand, failure to file Confirmation Statements (formerly known as annual reports) or submit annual accounts might lead to compulsory dissolution.

Voluntary Strike-Off

When a director requests that the company be dissolved, this is known as a voluntary strike-off. This will normally happen when they no longer have a reason to continue the business—for example, if they desire to retire or focus on other ventures.

Compulsory Strike-Off

Compulsory Strike-Off is enforced on a company by the registrar of companies, Companies House, instead of voluntary dissolution, which the firm initiates. This is typically thought to be the result of failing to file Confirmation Statements and yearly reports regularly. Companies House will finally determine that the firm is no longer in operation and will remove it from the register of companies.

Why Would a Company be Struck Off?

A ‘Strike Off’ occurs when a limited company is struck off from the Companies House register. There are two sorts of strike-offs: voluntary and compulsory strike-offs. After going through the strike Off process, a firm ceases to exist and cannot trade, make payments, or sell assets.

If a board of directors decides to dissolve their company, they have several reasons. It is usually is because they wish to close it down and retire or don’t have anybody to pass the firm on to. Some may even realise it isn’t worth selling.

On the other hand, Companies House could strike a firm off.

One could be struck off the Companies House register if there is a failure to submit timely accounts, failure to submit an annual confirmation statement is a serious offence. There could be noncompliance with legal obligations. It is also possible that no directors have been assigned to the company or the company has stopped operations altogether.

A Voluntary Company Strike Off is a type of dissolution that differs from liquidation. It occurs on a completely voluntary basis and is a frequent method of winding up a limited corporation. To qualify, the firm must have traded, changed its name, sold assets, or engaged in any other activity in the previous three months unless it was to strike off.

What is the Companies House Strike Off Process?

In all circumstances of compelled strike-off, the company in question will receive at least two formal letters notifying them of the impending strike and outlining the problems they are experiencing. Before taking action, Companies House must have reasonable reasons to suspect the company isn’t trading and should be shut off.

Companies House will publish their first strike-off notice in the Gazette if they do not receive a response from the company after issuing two letters. According to this notice, the corporation has two months until it is struck off and ceases to exist as a legal entity. You can check using the company name or company number of your company to see if your company has been removed from the Companies House Register.

When Will the Company be Struck-Off the Official Register?

The Companies House registrar will strike off the company within three months after the notice in the Gazette if there is no basis to do differently. At that time, a second notice will be published in the appropriate Gazette, and the company will be deemed dissolved and no longer exist.

Any cash or assets owned by the dissolved corporation will become Crown property at the strike off. As a result, it’s normally better to wait until the company’s residual assets have been distributed before submitting the DS01 form to Companies House.

What Company Records Need to be Kept After the Compulsory Strike-Off?

After a firm is struck off, business documentation must be kept for at least 7 years. This comprises invoices, receipts, and company bank statements, for example.

You should also keep a copy of the company’s employers’ liability policy and schedule if it hires employees. These must be retained for 40 years after the date of strike-off.

What Can You Do if Your Compulsory Strike-Off Action has been Suspended?

You can still consider some options if Companies House England and Wales have suspended your Compulsory Strike-Off action.

First, you can resubmit your application. You might get lucky, and your application will slip through the cracks. However, it’s important to remember that if a creditor can provide a valid explanation, your firm can be returned to the Companies House record later.

You can also resubmit your application after paying off any creditors. If your company has no debts, there’s no reason why your fresh application shouldn’t be allowed. However, going this path is contingent on the quantity of the debt and your ability to pay it off.

You can also enter a formal liquidation procedure. This usually entails a Creditors Voluntary Liquidation (CVL), in which an Insolvency Practitioner is appointed to oversee the company’s operations and close it down.

You can find more information on what to do if your compulsory strike off action has been suspended here.

Company Closure or Keep Company Open

You can also take specific steps if you accept the compulsory strike-off or if you contest the compulsory strike-off.

If you opt for Company Closure after receiving the Compulsory Strike-Off Notice

In certain scenarios when the company may be nearing the end of its life cycle, and the company directors are content for it to be struck off. As long as you don’t owe anyone anything, have all of your assets been realized, and have stopped doing business, you can formally close the firm and remove it from the official registry.

If you want to accept the strike off and close your business, but you still owe money or have assets, you’ll need to go through the legal process of Company Liquidation.

If you want to keep your company open

If you believe the strike-off is unjust or that the information is wrong, you must submit a suspension application to Companies House directly. You may need to address any problems, such as adding missing accounts to the system, sending out pertinent statements, and showing proof of active trading.

If you can show that your company is viable and shouldn’t be struck off, you may be able to get the strike off suspended or completely removed.

Can I Stop a Compulsory Striking Off Notice?

If you want to keep your firm from being struck off, you’ll need to make sure you reply to any faults that Companies House has discovered. This primarily entails updating papers and filing them with Companies House.

If you have moved and have not updated your details in official records, you may be required to confirm that your business is still operating, and you may also be required to furnish a new business address.

In any situation, you must act quickly and clearly in response to Companies House to guarantee that your business may continue to operate.

What are the Repercussions of a Company Strike Off?

Companies House can knock your business off the register if you don’t reply to a compulsory strike-off, even if you are still trading. This means that your business is no longer legally recognized. It also means you won’t be able to appeal the strike-off any longer, and you will be denied financial assistance.

Directors may be investigated for possible misbehaviour that resulted in their dismissal. If you have been served with an obligatory strike-off notice and believe it is erroneous, you must move quickly. You can call the Companies House Telephone for updates, send an email to Companies Hous, or send them a post via the address:

Companies House England and Wales, Dissolution Section, Registrar of Companies for England and Wales Companies House Crown Way, Cardiff CF14 3UZ.

Company closure

  • The fundamental effect of compulsory strike-off is that the company ceases to exist as a ‘legal person’ after it is dissolved and so is unable to trade or perform any of the legal functions of a corporation.

Asset Loss

  • Any assets of the disbanded corporation will be termed ‘bona vacantia,’ meaning they will instantly become the Crown’s legal possession. Any funds in the company’s bank account are included in this (which will be frozen).

Reputational Damage

  • Even if the firm is not subsequently liquidated, forced strike action becomes a public record (i.e., notice is published in The Gazette). This may have a bad reputational impact on the company. As a result, timely filing of confirmation statements and annual accounts is critical. Take advantage of any instruments that can assist you in this procedure, such as Quality Company Formations’ Confirmation Statement Service.

Personal liability

  • A compulsory strike-off can result in enforcement action being brought against individual corporate directors and the firm. Failure to produce confirmation statements or annual reports is a criminal offence, and directors can be prosecuted and face the strike-off as a personal liability. Furthermore, former directors of a compulsorily dissolved firm would suffer severe reputational consequences and may find it more difficult to form a new company. Directors may even be disqualified in specific instances.

Directors

  • Shareholders and directors are deemed to be dealing without the protection of limited liability if a company that has been struck off continues to trade (i.e. because the limited liability company has ceased to exist). As a result, any debts incurred in business conduct or any amount that the company owes might be held against them.

When Can Creditors Object to a Compulsory Strike Off?

The directors and shareholders aren’t the only ones who can protest a company’s involuntary dissolution. It could also be in the best interests of the company’s creditors, such as HMRC, to object to it being struck off. Creditors are likely to file an objection and have the application suspended so that they can reclaim the money owing to them before the firm closes.

Suppose the firm is removed from the Companies House Register. In that case, any surviving creditors will have to write off the money due as a bad debt or seek a court order to reinstate the company, which may be a lengthy and expensive procedure.

What happens if a Compulsory Strike-Off is served to Insolvent Companies?

You may believe that a compulsory strike-off is an effective means to close the firm down without having to repay its debts if it has debts it cannot afford to repay or it is insolvent. On the other hand, waiting to be struck off by Companies House is a risky strategy that could result in major consequences for the company’s directors.

HMRC or other creditors can either oppose the compulsory strike-off or petition to have the firm reinstated to the Companies House Register if it has already been struck off in this case.

They can then put it into forced liquidation in order to recover the money owing to them. As a result, the company will be thoroughly investigated, perhaps leading to director disqualification and personal accountability for company debt.

If an application to strike a company off the Companies Register is denied because it has outstanding obligations that cannot be paid, the firm will be considered insolvent. A voluntary strike-off will not be allowed. Unless the company’s creditors impose a Compulsory Liquidation, a Creditors’ Voluntary Liquidation (CVL) is likely to be the best option.

FAQ's

What is a DS01 Form?

A DS01 form is used to formally dissolve or strike off an undesired company, which means the name will be deleted from the Companies House record, and the company will cease to exist legally.

What Happens Once The DS01 Form is Filed?

After companies House has confirmed the basic data on the DS01 form, a notice of the intention to strike off will be published in the London, Edinburgh, or Belfast Gazette (depending on the country in which the company was incorporated; Welsh companies are published in the London Gazette).

The procedure will be halted for additional examination if a legitimate protest against the corporate strike-off is received.

Do I Still Have to File Accounts with the Companies House Register After Filing the DS01 Form?

Companies House will no longer pursue these if an application to strike off the firm is accepted, but they will become payable again if the striking off is cancelled.

What Does "Compulsory Strike-off Suspended" Mean?

If your company’s strike off has been put on hold, it’s usually because your firm owes money to creditors who stand to lose money if the company is dissolved.

Companies House will suspend the strike-off while they investigate; you will have two months to appeal the strike off and request it be halted.

What Does "Compulsory Strike-Off Discontinued" Mean?

If your company’s forced strike-off has been discontinued, it implies that the strike is no longer in effect and that your business can resume operations. This usually signifies you’ve answered Companies House’s queries or claims promptly.

What is a Members Voluntary Liquidation (MVL)?

A Members Voluntary Liquidation (MVL) is a formal procedure for winding up the affairs of a solvent business. A corporation that is solvent has more assets than liabilities and hence can pay off all of its debts.

Members of a corporation and its appointed Insolvency Practitioner participate in an MVL.

How Can A Company Remain Trading?

If the Companies House registrar receives a court order, the corporation can be restored and remains active. Anyone considering filing a court case to reestablish a firm should get independent legal advice to continue trading.

Only a court ruling can revive a corporation that has been struck off due to voluntary dissolution and is no longer trading legally.

Summary

A compulsory strike-off notice is sometimes formally called a dissolution. When a company is dissolved, it is no longer listed in the Companies House Register, and it has essentially ceased trading.

The company strike-off notice will be in effect a few months after it has been announced in the official Gazette. There are steps you can take to stop the compulsory strike-off however, if it cannot be stopped, you have to comply with the conditions and settle your company’s affairs.

Though getting rid of a company’s assets or selling it to an interested party is not easy, the staff and company director of a dissolved company have to make do to comply. So, if you have your company registered in the UK, then you should consider working with an insolvency practitioner, just in case.

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