Sometimes a company’s purpose can run its course and it needs to be closed down (or dissolved). This may be because there has been a group restructuring, or the company has been acquired by another party, or it is simply no longer required.
At this point, the directors of the company have several options, which include:
1. voluntarily striking the company off the register of companies;
2. doing nothing (known as an involuntary strike off); or
3. putting the company into liquidation (which is the costliest procedure).
The quickest, most inexpensive and straightforward option, if done properly, is that of voluntary strike off, which is a procedure driven process. It is important to make sure that the directors follow the process carefully otherwise it could result in unexpected costs and time to correct an issue later on.
Considerations
Before making an application for a company to be voluntarily struck off the register of companies, the directors must make sure that the affairs of the company are in order and take care of administrative formalities. These can include (but are not limited to):
• assessing whether the company has any liabilities such as loans and tax payments and whether the company can meet those liabilities (if not, the company should look at an insolvency procedure and not voluntary strike off);
• informing the company’s creditors (if any) that the company has decided to dissolve itself;
• ensuring the company settles all of its debts before making any application;
• deciding what to do with the company’s assets (if any);
• dealing appropriately with the company’s assets, including emptying and closing the company’s bank accounts; and
• ensuring that share capital is returned to the company’s shareholders.
It is important that these considerations are taken into account as not doing so could result in the directors being personally liable or other issues later down the line. For example, forgetting to empty the company’s bank account could lead to a costly and time-consuming process to restore the company to the register and then recover the monies from the Bona Vacantia Division.
Voluntary Strike Off: A Reminder of the Procedure
The procedure to voluntarily strike a company off the register is generally fairly quick, inexpensive and straightforward.
Once the majority of the directors have resolved to voluntarily strike off the company, the company must complete form DS01 and pay the relevant fee (currently £10.00). This can be completed and filed online or sent to Companies House by post.
A key (and usually uncontentious) step to note is that, after having sent form DS01, there is an obligation to allow interested persons to object to the dissolution. This means that within seven days from the day the application is made, a copy of the application must be given to shareholders, directors, creditors and employees of the company.
There are certain formalities which must be followed when the notification is sent, and failure to do so is an offence which is punishable by imprisonment if that person failed to notify the relevant person of the application with the intention of concealing it.
Once Companies House has received the application and accepted it, the next step is for a notice to be published in the Gazette stating, amongst other things, that any person may show cause as to why it should not be dissolved.
If after two months after the date of publication of the notice there is no reason to delay the dissolution, the Registrar of Companies will strike the company’s name off the register, and the company will cease to exist as a legal entity (unless it is restored to the register).
Company Restoration
Once the company has been dissolved, it is possible, in certain circumstances, to restore it to the register of companies. This is typically because the company had title to an asset at the time it was dissolved which is of value (e.g. money in a bank account), or the company was struck off as a result of not filing certain documents, but it still continues to trade.
There are two ways to restore a company to the register:
1. by making an application to Companies House for an administrative restoration; or
2. making an application to the Court for an order to restore the company to the register.
If the company was struck off because it appeared to Companies House that it was no longer carrying on business or in operation (e.g. because it failed to file accounts), it is possible to apply to Companies House to for an administrative restoration. An application for administrative restoration can only be made if:
a. the applicant was a director or shareholder of the dissolved company;
b. the company was struck off the register and dissolved by the Registrar of Companies within the last 6 years; and
c. the company was trading at the time it was dissolved.
If the above criteria are not satisfied, an order from the court is required for the company to be restored to the register.
Administrative restoration is not possible if the directors of the company voluntarily applied to strike the company off the register. In these cases, an application to restore must be made to Court.
If the application is successful, the company will be restored as soon as the registrar sends a confirmation letter. If the company is being restored simply for the purpose of obtaining possession of an asset, then Companies House or the order of the Court will usually require the applicant to provide an undertaking that the company will be dissolved once that purpose has been achieved.
If you would like to discuss your company and its options on dissolution and restoration and any other legal issues your business might be facing, then please contact Jenny Lau at jenny.lau@ilaw.co.uk and George Duncan at george.duncan@ilaw.co.uk.
