When a limited company is removed from the register at Companies House, this is known as a strike-off. Once a company has been struck off the register, it ceases to exist and cannot trade, sell assets, or make payments. Strike-offs can either be voluntary or compulsory. The focus of this article is on voluntary strike-offs and the dangers to be aware of.

Voluntary Strike-Off

A voluntary strike-off can be initiated by the directors when they wish to wind up the Company’s affairs. To qualify, the company must meet the following criteria:

  • it must not have traded or sold off any stock in the last 3 months;
  • it must not have changed names in the last 3 months;
  • it must not have been threatened with liquidation; and
  • it must not have any agreements with creditors.

The Dangers of a Voluntary Strike-Off

Once a company has been struck off, the directors lose control of the company’s assets, bank accounts and any money due to the company. On this basis, it is imperative that there are no assets (such as property or money) left in the company, and no monies owed to the company, as otherwise these will vest in the Crown under the rule of Bona Vacantia.

Another consideration is that the directors must not voluntarily strike off a company with any outstanding debts owing to creditors. In such an instance, a creditor could apply to restore the company to be paid any debts owed to them. Upon restoration, the directors may face investigation from Companies House for their conduct in striking off a company that owes creditors. In addition, directors may face fines, become personally liable for company debts or be disqualified from acting as a company director for a number of years. The worst-case scenario is a custodial sentence.

Restoring a Company

If a company has been voluntarily struck off the register but the directors wish to restore the company, they can only do so by obtaining a court order. The application for restoration must be made within 6 years of the dissolution of the Company. If the purpose of restoring the company is to recover assets (such as money or property), the directors need to provide an undertaking that the company is not going to trade again and will be dissolved as soon as the assets have been recovered.

A voluntary strike off is a convenient option for directors who wish to dissolve a company, however, given the immediate loss of control over the company following the strike off, directors must ensure they do not leave any assets in the company or debts owing to creditors. The process of restoring a company following a voluntary strike off can be expensive, complicated, and lengthy and should, if possible, be avoided.

BHW’s Corporate and Commercial department has experience in advising on the company restoration process and would be happy to assist in submitting the application and handling all that is involved. For further information or advice, please contact our Corporate and Commercial team on 0116 289 7000 or email info@bhwsolicitors.com.

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