What Happens When a Company Strike-Off Procedure is Rejected?

March 22, 2024 / Business Insolvency

A company strike-off, also known as company dissolution, is a procedure in which directors can close their solvent companies. It is a voluntary procedure, one that grants directors a streamlined framework for closing, often taking very little time once proper preparations are made. However, if corners are cut or mistakes are made, directors make the procedure vulnerable to objections. Should one be made, the procedure can be greatly delayed, and potentially even rejected outright. As such, it is best to ensure you are adequately prepared before attempting to strike-off your company.

In this article, Clarke Bell breaks down the company strike-off procedure, why it might be rejected, and what you can do to avoid such obstacles.

What is a company strike-off?

A company strike-off is a procedure available to directors of solvent companies. It is functionally similar to other forms of closing a company, involving the cessation of trading, disposal of assets, and removal of the company from the Companies House register. However, the company strike-off procedure does have its unique qualities. Namely, the procedure offers a key trade-off: the procedure itself is extremely cost-effective, requiring only a few nominal fees, but directors must shoulder complete responsibility for the procedure. Should any issues arise, directors will ultimately be held liable, unlike with some other procedures.

If you intend to strike-off your company, you must ensure the proper paperwork is filed, and that all assets owned by the company are either disposed of or transferred. Failing to do so will result in said assets being considered “bona vacantia”, or without an owner, and ownership will be transferred to the Crown.

How can a company strike-off be initiated?

Directors can initiate a voluntary company strike-off by submitting a DS01 form with Companies House, either in paper format or using the online portal. This will cost £10 and £8, respectively. Assuming your company is eligible, solvent, and all rules are properly followed, a company may begin the striking-off procedure. At this stage, Companies House will assess the particulars submitted by a company’s directors, ensuring the basic information disclosed is accurate. If the check doesn’t turn up any discrepancies, a notice of the upcoming dissolution will be posted in the Gazette. This notice gives related parties, such as outstanding creditors or uninformed directors, a chance to object, delaying the attempted strike-off action or even stopping it entirely.

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Who can object to a company strike-off?

When a notice regarding the upcoming dissolution of a company is posted in the relevant Gazette, certain parties may lodge an objection. Objections are most commonly made by outstanding creditors, as they stand to lose out should the company be closed down before repayments are made. In such a scenario, creditors must first petition to reopen the company, then petition to have it liquidated, to recover their debts. Naturally, this typically demands a lot of time and resources. For this reason, creditors will keep a close eye on companies they suspect might consider strike-off action. Similarly, any parties with ongoing legal action against a company will likely do the same, and may lodge an objection should an attempt at dissolution be made.

While creditors and parties with ongoing legal action against a company are the most common objectors, there can be other, albeit less common, objectors. For example, members of the board of directors, shareholders, and other related parties who have not been notified of the intended dissolution may object. Lastly, parties who have evidence that the company in question has traded within the last three months, which makes the company ineligible for strike-off action, may object.

Why might someone object to a company strike-off

There are several reasons why a company strike-off would be opposed, largely depending on the party that takes issue. Creditors, for example, will usually object to a company strike-off procedure if the company hasn’t fully repaid its debts, or if the creditor has taken legal action against it. In this instance, creditors may present evidence of the outstanding debt to a court and reverse the attempted strike-off, potentially following it up with a winding-up petition. Alternatively, parties related to the company may lodge an objection if they haven’t been notified of the attempt at dissolution.

What happens if my company strike-off is rejected?

Once a company’s attempted strike-off action has been rejected, one of several scenarios may play out. Should the company have had its application rejected due to an application error, it may simply make a second, rectified application. Similarly, if the company has made a mistake, such as leaving a creditor unpaid due to oversight, it may remedy said mistake and try again. If your attempted strike-off has been rejected, Companies House will send you a letter including the reason behind the rejection. As such, remedying any issues should be fairly simple.

In some scenarios, a company will be rejected and ineligible for a second application. Such cases usually occur when a company has been found to either be insolvent, or have traded within the past three months. Should evidence of either be found, a company will be barred from dissolution, and may have action taken against it. For example, creditors may choose to submit a winding-up petition once they discover the attempt at dissolution.

Can a strike-off rejection be reversed?

In many cases, rejection is not the end of a company’s attempt at strike-off action. Most application rejections are the result of simple mistakes, either in the application itself, or elsewhere. As we mentioned, Companies House will detail the reasons behind a rejection in a letter, affording directors a clear path to solving any potential issues and allowing another application.

Insolvent companies that have been rejected may not submit another application, unless they have been restored to solvency.

Clarke Bell can help you

A company strike-off can be a good solution for solvent companies looking to wind down operations. It serves as a fairly quick and straightforward method of closing a company, allowing directors a reliable opportunity to close their companies. However, the procedure requires the company in question to be solvent. As such, insolvent companies must look to other avenues for a solution. Clarke Bell can help you find one.

We have more than 29 years of experience in helping companies, both solvent and insolvent, find the best possible paths forward. We can do the same for you.

Whether you require a Creditors’ Voluntary Liquidation, Members’ Voluntary Liquidation, or bespoke business rescue package, our team of experts can be there for you.

Don’t hesitate to contact us today for a free, no-obligation consultation and find out exactly what we can do for you.