Every company has a life cycle which often ends with the directors taking steps to apply to strike off and dissolve a company. However, there is a process to follow and requirements that must be met before closing a business in the UK. Read on to find out what you need to do.
Reasons for closing a business
There are many reasons that companies may choose to voluntary strike-off, including:
- Retirement
- Dispute about the company’s future
- No longer working in this industry
- Change company structure
- Company is failing to make a profit (should not be used in the cases of insolvency)
- Streamline corporate structure
- It was set up for a limited purpose which has ended
Criteria for closing a business
In order to be eligible to strike off a company, it must not have done any of the following in the last 3 months:
- Traded or carried on business
- Changed its name
- Made a disposal for value of property or rights that it held for the purpose of disposal for gain in the normal course of trading or carrying on business, e.g. a pizza seller could not sell pizzas but could sell the vehicle used for delivery.
The company must not also be the subject, or proposed subject, of either of the following:
- Insolvency proceedings such as liquidation, including where a petition has been presented but has not yet been dealt with
- A compromise or arrangement between a company and its creditors or members (Section 895 scheme)
A company can only apply for strike off if the only activities conducted in the last 3 months are those required to conclude the company’s affairs such as settling debts, comply with statutory requirements or apply for strike off and seeking professional advice to decide to make this application.
Process to close a business
To apply for voluntary strike-off, you should ensure that the following steps are completed:
- Hold a board meeting confirming that the decision has been made to apply for strike off
- Any filings are submitted including any confirmation statements, final accounts and company tax return
- De-register for VAT, resolve any outstanding liabilities with HMRC including Corporation Tax (or receive any refunds due as this will not be possible once strike off is completed)
- Close any bank accounts and distribute any funds (the account will be frozen once Companies House accept the application)
- Have the majority of directors sign the strike off application and wait for Companies House to accept this within 2 working days
- Once the application is accepted, notify interested parties of this
How long does the process take and what happens next?
Once submitted, Companies House can take up to 2 working days to approve (or reject) your application. Following this, a notice will be placed in the Gazette confirming that the strike off will be complete after at least 2 months has passed and no objections are received.
After this 2-month period, Companies House publish a final notice in the Gazette stating the strike off and dissolution dates which tend to be 1 week apart.
Who needs to be notified?
Any interested parties who will be affected of this application should be provided with a copy of it within 7 days. This includes creditors, members, employees, HMRC, local authorities, government agencies, training and enterprise council, managers or trustees of any employee pension fund, any directors that did not sign the application. If this is not done, the directors could be liable for penalties or prosecution.
What happens to any company assets not dealt with before the application?
If you fail to empty and close any bank accounts or sell any company assets before the application is processed by Companies House, these will be frozen and transferred to the Crown as Bona Vacantia (i.e., ownerless property). The only way to recover these would be to restore the company with permission from the Bona Vacantia Division.
Can anyone object to the strike off?
Any interested party can object to the strike off after the first Gazette notice but must be at least 2 weeks before the final date. Once an objection is received, Companies House will suspend the strike off to review this. Any objections must include supporting documents detailing the reasons for objecting.
If an interested party is owed money and misses this deadline, they can apply for a court order to restore the company in order to recover the funds owed to them.
What if we change our mind?
An application can be withdrawn if the company no longer wants to be struck off or no longer meets the criteria stated above. Section 1009 of the Companies Act 2006 sets out full reasons that an application should be withdrawn immediately, which can be completed online or by post.
If you change your mind after the company has been struck off and dissolved, we can assist you with administrative restoration of your company.
What other type of strike off is there?
Companies can also face compulsory strike off when they fail to comply with statutory requirements such as filing a confirmation statement, filing accounts and ID verification.
What does company dissolved mean?
Once a company is struck off, it will be removed from the register and no longer exists. The company will then be known as dissolved.
Who is liable if a limited company closes?
Following a company dissolution, directors can still be liable personally for any personal guarantees or if they are found to have failed in their duties, e.g., they committed fraud or engaged in misconduct. In some cases, companies can also be restored in order to pursue any debts.
In summary, you should now be clear on how to close down a limited company and ready to proceed. 1st Choice Incorporations is on hand to support you with all compliance needs throughout the life of your company, which includes completing the strike off process for you. Please contact our team to discuss your needs.
