Section 1003 of the Companies Act 2006 gives company Directors the authority to apply to strike off their company. Striking a company off and putting a company into liquidation are two different forms of dissolution and when considering the most beneficial way to wind a company down, it is important that you are aware of the differences between the two. The striking off process is carried out by the Registrar of Companies and a Members Voluntary liquidation is when a liquidator is personally appointed by the Shareholders of the company.
If a company has not traded for 3 months, it does not have any assets or liabilities and it has not changed its registered name, it can apply to strike off at Companies House. There are several things a company must do before they apply to strike off at Companies House. Some of these things include de-registering for VAT, preparing final accounts, closing any existing company bank accounts and distributing any company assets between the company Shareholders.
The striking off process is simple and requires the company Director(s) to submit a form DS01 to Companies House for the small cost of just £10. The form must be signed by all or the majority of the company shareholders and if a memberr does not sign the form they must be informed immediately by the other existing Shareholders. Once the form has been submitted and accepted by Companies House, the company no longer legally exists. However, the application to strike off can often be rejected by HM Revenue and Customs if the company tax returns are not up to date or if the company Directors have any outstanding debt with creditors.
When the company has applied to strike off at Companies House, it is imperitive that the relevant parties are made aware of this. The application must be sent to existing and potential company creditors, company employees and government departments such as HMRC. If a copy of the DS01 application is not sent to all relevant parties within 7 days and notice is not provided within this time period they could potentially be fined. This is also considered as a criminal offence. Any relevant party can object to the company being struck off and they must ensure that they write to Companies House immediately, providing strong evidence for their objection.
A Members Voluntary Liquidation is when a company is formally closed down in a tax efficient way. Once a liquidator has been formally appointed by the company, the process to enter liquidation is quick, simple and easy. A company is legally solvent when the total value of the company assets exceeds the total sum of its outstanding debts.
Once a liquidator is appointed, they will start their administrative duties straight away. As soon as the liquidator takes control of the company, the Directors no longer have control over the company or its assets. Correspondence and mail is re-directed and sent to the liquidators address and the company Director(s) do not have authority to act for the company. The liquidators main role in a Members Voluntary Liquidation is to realise the assets as quickly as possible and to then distribute the funds to the Shareholders and Creditors.
The board meeting is convened with the company Director(s) and a meeting with a local Solicitor is then arranged in order to swear the Declaration of Solvency. Once the Declaration is sworn, a general meeting is then arranged and the Shareholders of the company will attend. Here at DCA, all meetings paperwork is prepared by the Administrators, and sent across to the company Director prior to the meetings. Once the meetings have been held, we will write to the company bank and the account is immediately frozen. The liquidation is then advertised in the London or Edinburgh Gazette and the forms are sent to the Registrar of Companies within 15 days from when the Resolutions are passed at the meeting. All notices are sent to all known creditors of the company and they are given 28 days to prove their debt.
For further information regarding the solvent liquidation process, please contact us at our office on 01702 344558 for free, confidential advice.
Laura Kenna, Administrator