Firstly, what are Zombie companies? Well a Zombie company is a business which exists but only to that point. It has no way of resolving its financial difficulties and profits are only used to pay interest payments and not to reduce the debt. Typically it is a company with no chance of long term recovery.
This therefore has a negative effect on the recent Insolvency statistics released as despite being an overall drop in the number of formal insolvency cases this could be higher as there are a number of companies being struck off the register.
R3 have produced figures revealing that the number of firms opting to be removed from Companies House has risen by 28% from 139,594 in 2010-2011 to 178,996 in 2013-14.
According to the statistics the number of Creditors Voluntary Liquidations (CVL’s) dropped by 1%.
Whilst the striking off process is beneficial to the company it is not always the case for the creditors and therefore close attention should be made to any debtors which appear to be struggling.
Creditors can object to striking off and should do so if necessary, especially where investigations appear to be needed or assets remain in the company.
In a CVL a Liquidator is appointed and investigations are made into potential recoveries which can be made from assets or antecedent transactions such as Preferences or Transactions at Undervalue. If a company is struck off the register then you would need to pay to place it back on the register, then apply for the company to be wound up for investigations to be made.
Further information can be obtained from us and we can assist you by providing the relevant information to object to any striking off action.