Why strike off?
Debbie Cockerton explains the ins and outs of striking off applications
At DCA Business Recovery we have seen a rise in the amount of striking off applications made by directors and instigated by Companies House over the past 12 months. I am going to explore the reasons why a director would apply to strike off a company from the register and the advantages or otherwise of doing so.
Striking off is when a director applies to Companies House for their company to be struck off the Register of Companies held at Companies House. The process is commenced by the director completing a DS01 form and sending this to the Register of Companies, along with a £10 cheque. It is important to know that the cheque cannot come from the company bank account, and should be a personal cheque from the director or any other connected party.
Many directors will look to strike off their company as an alternative to a formal insolvency liquidation for cost reasons. However, sometimes it is not the easier route as certain conditions must be met before applying.
Firstly, before applying to strike off your limited company, you must close it down legally. Closing the business includes informing your decision to all interested parties such as creditors, shareholders, directors who didn’t sign the DS01 form, trustees of any pension schemes and HMRC.
The DS01 form can only be submitted on the expiry of three months from the last day that the company traded. This includes any payments made from the company or any other transactions and is not limited to the day that the business closed its doors. This period can significantly delay the process and, depending on creditor pressure, can be a key reason why striking off is not suitable for some companies.
The other important factor to consider is that redundancy payments from the Redundancy Payments Office (RPO) only apply when a company enters a formal insolvency procedure. It is not common knowledge that directors can also claim redundancy payments from the RPO and therefore these claims can sometimes be missed out on by directors.
After the form is submitted Companies House will then advertise their intention to strike off the company from the Register and write to all interested parties the director advised them of.
After a period of two months the company will then be removed from the Register held at Companies House. However, in this period any creditor can object to the process and does so by contacting Companies House to advise them of their objection; sometimes they will require proof that an invoice is outstanding, and they can keep their anonymity. Directors will most often know who the objecting party is (usually this is HMRC for outstanding taxes).
If an objection is raised, then the whole process will need to be started again and another application submitted for the removal of the company.
At DCA we contact directors of companies who have had their applications objected to and we offer a reduced rate to reflect the reduction in work required. This reduction is because the company has ceased trading at least five months ago and therefore some normal tasks will not be required by the liquidator.
To arrange a meeting or to discuss anything mentioned in this article further please contact us on our dedicated ICPA Helpline 0800 066 2540 and we will be more than willing to assist.
- Debbie Cockerton is a Partner at DCA Business Recovery
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