What happens when a company strike-off procedure is rejected?

A company strike off procedure can be instigated by directors of limited companies if they wish to close a business. In this case it is known as a voluntary strike off and is actioned by the company directors applying to Companies House to have their company removed from the Companies Register via the submission of a DS01 form or by completing the strike off process online. If the rules are followed correctly, this can be quite a simple process; however the vital parameter for a voluntary strike off is that the company must be solvent, with no outstanding debts.

What happens once a DS01 form is filed?

Once the DS01 form is filed, and the basic details have been checked by Companies House, a notice will be published in the London, Edinburgh or Belfast Gazette (depending on the country in which the company was registered; Welsh companies are published in the London Gazette) of the intention to strike-off. The purpose of the notice is to give any interested parties the chance to object to the dissolution of the company. If a valid objection to the company strike-off is then received then the procedure will be suspended pending further investigation.

Who can object to company dissolution, and under what circumstances?

Anyone connected to the business can object to its dissolution - this generally includes shareholders, creditors, and employees. A number of circumstances can lead to an objection, including:

• Failing to inform all the necessary parties that the business is being dissolved
• Directors falsely declaring solvency, whether deliberately, or as the result of accounting inaccuracies
• An employee wishing to take legal action against the company, or a creditor beginning legal action to wind up the company
• It is suspected that directors have committed fraud, or traded unlawfully
• A part of the closure process has not been followed – this could include failing to cease trade, or changing the company name during the three months prior to the application.

Valid reasons for objections to company strike-off

The most common reason for a company strike-off procedure being rejected or suspended is if HMRC believe that the company has unpaid tax liabilities such as VAT or corporation tax. Objections can also be raised by other interested parties such as:

• Creditors who have unpaid bills with the company.
• Anyone who has proof that the company has traded, or changed its name within the last 3 months.
• Any interested party who was not informed by the directors of the application to strike-off the company.
• Anyone who is currently engaged in legal proceedings with the company, or is taking action against the company to recover debts.

How are objections made?

Objections can be emailed or sent by post to the Registrar of Companies at Companies House. Making an objection effectively suspends the dissolution application made by the company until the situation has been investigated further – usually for between three and six months.

It is worth noting that, if a creditor is owed money, they can object to the company’s dissolution even after it has been removed from the Companies House register, as long as they can provide proof that the debt exists.

What happens when a company strike-off procedure is rejected?

If Companies House believes that the company is not suitable for voluntary strike-off then the procedure will be rejected. In this case the director applying for the strike-off will receive a letter, either from Companies House, or in cases where there is believed to be outstanding HMRC liabilities, directly from HMRC stating the reason for the rejection.

Once the director has received such a letter then they must either comply with the demands or make any outstanding payments immediately. Alternatively they can contact Companies House or HMRC to lodge an objection.

If the directors intends to repay their creditors (including HMRC) then it is important to ensure that by arranging for the funds to do, this could not be viewed as the company trading as this could result in the application for strike-off being denied.

What happens if the company is judged to be insolvent?

If an application for a company to be struck off the Companies Register is rejected due to the company holding outstanding debts, and these debts cannot be paid, then the company will be viewed as insolvent and a voluntary strike-off will not be permitted. In this case a Creditors’ Voluntary Liquidation (CVL) is likely to be the best course of action, unless a Compulsory Liquidation is impressed upon the company by its creditors.

In either of these circumstances an Insolvency Practitioner will be appointed (either by the directors in the case of a CVL or by the creditors in the case of a Compulsory Liquidation) who will complete the process of winding up the company and selling its assets to repay its creditors.

If you believe that your company is insolvent or you are experiencing pressure from HMRC, Begbies Traynor Group are specialist licensed insolvency practitioners, who can guide you through the process of closing an insolvent company. We will ensure the highest levels of compliance throughout the process and will recover the maximum value for your company’s assets.

Contact our confidential advice line on 0800 063 9221 to arrange a free same day consultation at one of our nationwide offices. Our business recovery experts and licensed insolvency practitioners are on hand to provide real world tailored advice for your individual situation.