5 Reasons for Company Dissolution – and how to avoid them 

Company Dissolution

5 Reasons for Company Dissolution – and how to avoid them 

by | Jul 1, 2024

As a limited company, LLP or CIC, you will have joined the Companies House register upon incorporation of your company, and by being on this register it means that your company legally exists. However, there are times when a company can be struck off the register and dissolved, meaning legally it no longer exists, and any assets will be passed to the Crown.  

There are 2 ways in which this can happen; compulsory, which means that the process is started by Companies House themselves, and voluntary, which means it was the decision of the company directors. In this blog, we list the 5 most common reasons for company dissolution and offer solutions to avoiding or stopping this process if you find your company facing dissolution.  

1. Not filing a Confirmation Statement 

All companies have a duty to deliver a Confirmation Statement to the Registrar of Companies, as per section 853A of the Companies Act 2006. You have a duty to deliver this statement within 14 days of each review period (which is 12 months from the filing of the last Confirmation Statement) ends. Failure to file this means that you are failing in the duties you must adhere to whilst on the Companies House register, and it will lead to Companies House believing that the company is no longer in operation.  

Solution – Be sure to always file your Confirmation Statement within the deadline given for your company. If you miss this deadline, Companies House will send you 2 reminder letters before starting the strike off application process. If you receive one of these letters, be sure to take notice and file the Confirmation Statement as soon as possible.  

Filing the Confirmation Statement before the final dissolution notice is issued in the gazette will stop the dissolution process.  

2. Failing to file Statutory Accounts 

As with filing a Confirmation Statement, the requirement to file accounts with Companies House is covered under sections 441 – 443 of The Companies Act 2006. You have a duty to file these accounts within 9 months of the end of your accounting period. For example, if your accounting period runs from 31st January 2023 to 31st January 2024, you would have until 31st October 2024 to file these. Failure to file within the correct timeframe will, again, cause you to fail in the duties you must adhere to, and will cause Companies House to begin the strike-off process.  

The different types of accounts and different filing requirements applied to companies vary depending on the company type and sizing structure. For more guidance on Companies House annual accounts, please visit the Gov.uk website here.  

Solution – Be sure to file your annual accounts within the 9-month deadline given. Make sure to act on any reminder letters you receive in relation to your accounts. If Companies House issues a compulsory strike-off notice, you will receive post from them regarding this. Make sure to file your accounts before the final gazette notice is published and the subsequent strike-off has been completed.  

Filing your accounts late will incur a penalty, and the severity depends on how late they are delivered. At the time of posting, the current Companies House timeframes and respective penalties are: 

Length of period (measured from  the accounts due date) Penalty fine 
Not more than 1 month £150 
More than 1 month but not more than 3 months £375 
More than 3 months but not more than 6 months £750 
More than 6 months £1,500 

3. The company has no directors listed on Companies House 

Directorship of a company can change due to several reasons, including resignations and retirement. A company must always have at least one human (or natural) director responsible for its daily running. Corporate bodies can be company directors, but there must also be at least one individual as a director as well.  

Should there be a change in the company’s natural director for some reason, another director must be appointed immediately after the current director resigns. If a company is left with no directors, the registrar of Companies House will question how the company is carrying out business and begin the process to strike the company off the register.  

Solution – If your company is going through a change of directorship, always make sure that a new director is appointed prior to or at the same time as the previous director is resigned. If a new director is not appointed at the same time as the current director’s resignation, be sure to appoint someone as soon as possible. If no director is appointed, Companies House will write to the company informing them that a new director must be appointed within a specific time frame. If no director is appointed, strike-off action will begin against the company. This can be stopped by appointing a suitable director before the end of the strike-off process.   

If no suitable replacement is available to act as a director for a company, the company can voluntarily apply to be struck off from the register (more information regarding voluntary strike off is listed below in reason 5).  

4. The registrar believes the company is no longer in operation 

Sometimes Companies House may have reason to believe that a registered company is no longer in operation, including:  

  • The Confirmation Statement or Accounts have not been filed  
  • The company has no listed directors on Companies House, 
  • Mail sent from Companies House to the company’s registered office is returned as undeliverable/unopened – leading Companies House to believe that they may not be operating from the registered office address listed.  

Solution – Make sure that Companies House always knows the company is in operation by complying with all responsibilities. You can do this by always maintaining at least one natural director, keeping on top of your annual filings and using a registered office address that you have permission to use, and where you can access all statutory mail for your company. If you change your registered office address, update Companies House records within 2 weeks, so they always hold accurate information for your company.  

5. A voluntary application has been made 

Whilst the above processes are the result of Companies House compulsorily striking off the company, directors themselves can apply to voluntarily dissolve the company. This may be done due to:  

  • Retirement 
  • No replacements are available to take over the running of the company, and  
  • The company is not financially viable  

Before a voluntary application can be made, however, certain criteria must be met to dissolve your company. The company must:  

  • Have not traded or sold off any stock within the last 3 months 
  • Have not changed their name in the last 3 months 
  • Not be threatened with liquidation, and 
  • Have no creditor agreements 

Any funds which the business holds, such as money in bank accounts, will need to be transferred out of the business bank account as the bank account will be frozen, and upon dissolution, any funds will be passed onto the Crown. You have a responsibility to inform all relevant parties of your intention to dissolve the company, including creditors, debtors, shareholders, employees and any directors who did not sign the application form.  

Solution – If you are an interested party, and you have a reason to object to the company being dissolved (such as being owed money or having a legal claim against them), you can notify Companies House of your objection after the publication of the first notice in The Gazette to stop this process. You will have to provide supporting evidence with your objection, such as invoices or other proof you are owed money.  

Those are the top 5 reasons why companies are struck off the Companies House register. If you find yourself in any of these situations and wish to cancel the dissolution process, be sure to follow our advice, or contact our team for assistance.  

If you do nothing, the process will continue, and the company will be dissolved not more than 2 months later. Any assets in the company bank account and any assets owned will be transferred to the Crown – if you are continuing with the strike off procedure be sure to sell the assets and transfer any funds out of the company bank account before the final notice is posted in The Gazette. 

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