Directors wishing to close their limited company can apply for a dissolution, also known as a ‘company strike-off’. However, if the company has unsettled liabilities or creditors that haven’t been paid, you could see your company’s strike-off application rejected.
Should this happen, your best option would be entering a Creditors Voluntary Liquidation (CVL) to close the insolvent company, drawing a line under it.
What happens in a company dissolution/strike-off?
Once the director has filed the DS01 form for dissolution, the details are checked against the register at Companies House. A notice is then published in the London Gazette (for English and Welsh companies, those in Scotland and Northern Ireland have their own Gazettes).
You can apply to dissolve a company if any of the following apply:
- There’s been no trading or selling of stock in the last three months.
- The company has no ongoing legal or insolvency proceedings.
- It hasn’t changed its name in the last three months.
- Creditors haven’t applied for a winding-up petition to force the company into compulsory liquidation.
The period of notice allows any interested parties an opportunity to object to the strike off.More on company dissolution
Reasons a strike-off application could be rejected
On occasion, a company could see its strike-off application rejected or suspended, which could be for several reasons:
- The company owes one or more creditors.
- There’s evidence that the company has traded or changed its name in the three months before the dissolution’s filing.
- The company is engaged in legal or insolvency proceedings.
- Directors haven’t informed all interested parties or are found to have committed wrongful trading.
What should you do if your strike-off application is rejected?
Either HM Revenue & Customs (HMRC) or Companies House should notify directors of the suspension or rejection. After which, they should follow the instructions included, which may involve settling an outstanding balance or adhering to other listed demands.
If your company is insolvent and cannot repay the liabilities that led to the rejection, you should seek help through a licensed insolvency practitioner who can guide you through the processes available and advise you of the best way forward.
How we can help
If your company’s strike-off application is rejected, you should take the necessary action to alleviate whatever caused it. For example, if the problem is an unsettled debt that the company cannot afford to repay. In that case, you should put the company into an insolvency arrangement via a licensed and regulated insolvency practitioner.
- Closing via an insolvent liquidation
A Creditors Voluntary Liquidation (CVL) is a formal insolvency procedure designed to close insolvent companies. A licensed insolvency practitioner takes control of the company, and all creditor pressure is frozen for the duration. Staff are made redundant, allowing them to claim from the redundancy payments office. Once the liquidation is complete, the insolvent company is closed, and any unsettled debt is written off, allowing the directors to start afresh, setting up a new limited company should they wish to.
More on Creditors Voluntary Liquidation (CVL)
If you still want to save the company and continue trading, there are other insolvency arrangements available. These either allow the company to repay the debt at an affordable rate (a Company Voluntary Arrangement – CVA), or to restructure (administration).
A dissolution is a common way to close a limited company, striking it off the register at Companies House. However, if the company has unsettled debts or is undergoing legal action, the directors could see their strike-off application rejected. Should this happen, the directors should repay the outstanding balance and settle any legal or insolvency issues. The latter of which can be done by speaking to a licensed insolvency practitioner who can guide you through the relevant procedures. If the directors are found to have made a dishonest strike-off application, they could be fined and/or prosecuted.
Can anyone object to liquidation?
While the company’s creditors can object to a dissolution if what they’re owed is unsettled, they cannot object to a liquidation. A CVL is meant to ensure the company’s creditors get a better return than if they were to petition the company into winding-up via compulsory liquidation, and the insolvency practitioner will work in the creditors’ interests throughout the process.
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