When a limited company is dissolved or in other words ‘struck off’, its name is removed from the companies register at Companies House and it will cease to exist legally. To be eligible for this process, directors must sign a declaration of solvency and make sure that all creditors are paid within 12 months.
Insolvent companies can’t be dissolved or struck off and if the company fails to pay its creditors after a year, it will be restored to the official register.
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The Strike Off Process
Prior to making a strike-off application, directors are obliged to close down the company legally. This involves announcing the plans to shareholders, creditors and HMRC.
Once the strike-off application is complete, a copy must be sent to all of the interested parties within a seven-day period to avoid incurring a penalty.
If the tax authority isn’t notified of the strike-off, it is highly likely that any outstanding tax liabilities will still be discovered as Companies House publishes the details of all companies that have filed a strike-off application in ‘The Gazette’ to alert creditors to the companies that have applied to be struck off three months after the date of the notice.
Why Would a Company Strike off be Suspended?
If any tax liabilities emerge, HMRC will send a warning letter to company directors, informing them that it has raised an objection to the application.
As a consequence, it’s only possible to strike off a company when it is completely up to date with its tax obligations.
Objections to company strike off generally come when HMRC, or another creditor, feel the company is trying to dissolve without following due protocol, usually to avoid paying debts, or escape legal proceedings.
Who can Object to a Company Dissolution and Under What Circumstances?
Anyone who is connected to the company can raise an objection to its dissolution, including shareholders, creditors and employees. If the objections are upheld, the company may be restored to the official register as if the dissolution had never happened in the first place.
There are a range of circumstances that can lead to an objection, including:
· Failing to inform all the relevant parties that the company is being struck off
· Directors declaring solvency when the company is in fact insolvent. This could be deliberate or as a result of accounting inaccuracies
· An employee wanting to take legal action against the company or an irate creditor starting the process of legal action to have the company wound up.
· There are suspicions that directors have committed fraud or traded unlawfully
· Part of the process has not been followed to the letter. For instance, the company failed to cease trading or changing the company name three months before the strike-off application.
Objections can be raised via email or sent in writing by post to the Registrar of Companies at Companies House. Raising an objection suspends the company’s strike off application until the situation has been investigated fully. This typically takes between three and six months.
Creditors can raise an objection to the company being struck off if it is still owed money and the company has been removed from the official register as long as it can provide proof that the debt exists.
What Happens when Strike Off Objections are Upheld?
In the scenario that Companies House upholds the objection, the strike off application will go no further. If the company has already been dissolved, it will be restored to the official register and the actions of the company directors prior to the dissolution process will be investigated . If any evidence of misconduct or fraud emerges, limited company directors can be disqualified for up to 15 years and may receive a custodial sentence.