How to strike off or dissolve a limited company

What is a limited company strike-off?

Limited company strike off, also referred to as dissolving a company, is the procedure for concluding an undesired company and eliminating its registration from the Companies House record. Following the striking off or dissolution, the company ceases to exist as a legal entity, and all trading activities come to an end.

Dissolving – or striking off – a limited company: What you need to know

Striking off a limited company, also known as company dissolution, involves the voluntary removal of a company from the register held at Companies House. A company with no debts or debts that it can fully repay promptly may opt for striking off as a quicker and more cost-effective alternative to formal liquidation when closing the company.

The reality is that very few businesses last indefinitely, and there may be a time when you need to contemplate closing your limited company.

One approach is to have the company dissolved and remove its name from the Companies House register. If you are considering striking off your limited company, here are responses to frequently asked questions about company dissolution:

What does company strike-off or dissolution mean?

Dissolving a company also referred to as ‘dissolution’ or ‘striking off’, is the process of terminating a limited company by removing its name from the official register maintained at Companies House. Once the name is struck off the register, the company ceases to exist legally.

Is limited company strike-off the same as liquidation?

Liquidation and strike-off/dissolution are distinct processes. Dissolving a limited company is a method for closing the company in situations where no debt exists or where any outstanding debt and other liabilities can be settled within 12 months.

Liquidation, on the other hand, is a different approach. If your company is unable to settle its debts, liquidation becomes the most suitable option. Liquidation involves identifying a company’s assets, selling them to generate as much money as possible, and utilising these funds to settle outstanding debts and creditors to the extent possible.

Liquidation can only be initiated under the guidance of a licensed insolvency practitioner, who oversees the entire process on your behalf. If you aim to close a limited company with debts, our team can offer expert advice on the liquidation process.

Can I strike off or dissolve my limited company?

In addition to your company being solvent, several conditions must be fulfilled before you can proceed with striking off a limited company through the dissolution process. 

Your company must:

• Have not traded or sold off any stock in the last 3 months
• Have not changed names in the last 3 months
• Not be under the threat of liquidation or any other form of insolvency proceedings, or have a formal repayment agreement with creditors, such as a Company Voluntary Arrangement (CVA)

How do I dissolve my limited company?

The process of striking off your limited company involves submitting a DS01 form, which must be signed by a majority of the directors (or all if there are two or fewer). The form needs to be sent to Companies House, and a copy must also be sent to all ‘notifiable parties,’ including creditors, employees, and shareholders.

Subsequently, a notice announcing the decision to dissolve the company will be placed in the Gazette. Your company will be officially dissolved 3 months after this notice is published, assuming no objections have been raised. The Gazette will then publish a final notice confirming the company’s striking off.

What do I have to do before striking off my limited company?

Before initiating the process to dissolve your limited company and have it struck off the Companies House register, you have several responsibilities to address. 

These include:

• Ensuring the distribution of business assets among shareholders. It is crucial to complete this step before applying for strike off, as any assets left within the company upon dissolution become Bona Vacantia, and ownership automatically transfers to the Crown.
• Paying employees their final wages and adhering to specific procedures if staff redundancies are part of the process.
• Settling any outstanding Corporation Tax, PAYE, NI, and resolving other tax liabilities.
• Filing accounts and a company tax return with HMRC, specifying that these are the final accounts due to the planned dissolution of the company.
• Requesting HMRC to close down the company’s payroll scheme and deregister for VAT.
• Confirming that the company has paid or can pay any outstanding debts.
• Closing the company bank accounts.
• Informing all relevant parties and HMRC of your decision to dissolve the company, within 7 days of submitting your strike off application to Companies House.

Can anything stop the strike off of my limited company?

Anyone has the right to object to the proposed dissolution of your company. If your company has outstanding debts, it is likely that creditors will raise objections to your strike off application.

If an objection is sustained by the Registrar, the company will not be allowed to be dissolved, and your strike off application will be put on hold.

It is important to note that a creditor can seek a court order to reinstate your company to the register even after dissolution if you have evaded payment. Hence, it is crucial to inform all relevant parties of your intention to dissolve the company and ensure full payment to all creditors before proceeding.

There could also be reasons for you, as the director of the company, to suspend the strike off proceedings. You must withdraw your application if your company undergoes a name change, continues trading, or if you become aware that it is insolvent. In such cases, you must complete form DS02 to reverse the intended dissolution.

Can a Dissolved Company Continue To Trade?

When a limited company is dissolved at Companies House, it loses its status as a legal entity, rendering it unable to engage in trade, and all business activities must cease immediately. Directors, if they desire to continue their business ventures, may have the option to establish a new limited company, but the discontinued company cannot be used for ongoing trade.

What are the disadvantages of striking off my limited company?

While dissolving your limited company may seem like a straightforward process, it demands caution. Providing false information in your application, whether deliberately or inadvertently, or neglecting to inform an interested party of your decision to strike off, can lead to severe consequences. Director disqualification, substantial fines, or even imprisonment in extreme cases may be imposed.

If a creditor suspects that your limited company has not been closed down through the correct channels, or if they have a legitimate reason to contest the closure, they can appeal for your company to be reinstated on the register at Companies House. If successful, this would enable them and any other outstanding creditors to pursue your company for unpaid debts.

Opting for the formal liquidation process, such as a Creditors’ Voluntary Liquidation, when closing down your limited company reduces the risk of subsequent restoration by creditors. This is because the insolvency practitioner overseeing the liquidation ensures that the maximum amount of money is realised from company assets and distributed equitably among all creditors. If a licensed insolvency practitioner manages the company’s closure, creditors are highly unlikely to successfully petition for the company’s restoration.

Director Redundancy and Company Dissolution

Another lesser-known drawback of dissolving your company instead of liquidating it is the forfeiture of your right to claim director redundancy. Director redundancy operates in a manner similar to staff redundancy and can be a valuable financial support during this challenging period.

Many limited company directors choose to strike off their company instead of opting for liquidation because it is a more cost-effective alternative compared to the average expense of liquidation.

However, what is often overlooked is that pursuing liquidation may open the door to potential director redundancy, the value of which could exceed the cost of liquidation fees.

If you receive a regular salary through the PAYE system, work a minimum of 16 hours per week for your company, and your company has been incorporated for at least two years, you are likely eligible to claim director redundancy in the event of the company going into liquidation. It is advisable to assess your potential entitlement to director redundancy before finalising the decision on how to proceed with the closure of your company.

It’s important to note that director redundancy is not available if you dissolve your company using the DS01 strike-off process.

What are the alternatives to dissolving my limited company through the strike-off process?

Dissolving your limited company might be the most suitable course of action in straightforward situations with minimal or no trade, no outstanding debts, and no funds to extract from the company. However, if your situation is more complex, there are alternative options you may want to explore before choosing the strike-off route.

(I). Members’ Voluntary Liquidation (MVL)

Similar to dissolving a company, a Members’ Voluntary Liquidation (MVL) is only applicable to companies capable of settling their debts within 12 months. An MVL differs from an informal strike-off process as it involves appointing a liquidator to facilitate the procedure. The liquidator contacts all creditors, requesting proof of debt. Once all outstanding debts are settled, the remaining funds are distributed among the shareholders. While an MVL incurs additional costs due to the appointment of a liquidator compared to dissolution, it might make better financial sense from a tax perspective if a significant value of shareholder funds is involved.

(II). Register the company as dormant

Although a dissolved company can be restored to the register within six years, this process involves substantial financial costs. If you anticipate the possibility of needing the company in the future, a more prudent option might be to register it as dormant. This approach allows you to keep the company on the ‘back-burner,’ ready for potential reactivation when needed.

How Vanguard Insolvency can help

If you are contemplating the dissolution of your limited company and are uncertain about whether the strike-off process is the best approach, Vanguard Insolvency can provide assistance. Our team of licensed insolvency practitioners can guide you through all available options, including dissolution and liquidation, and recommend the most suitable course of action for you and your business. Contact our expert advisers today to schedule a free, no-obligation consultation. With an extensive network of 100 offices, we offer confidential director support across the UK.

Read More:

• Company strike off has been suspended – what now?
• How to restore a company to the Companies House register
• Submitting a DS01 form to strike off your limited company
• What is a first Gazette notice for compulsory strike off?

Frequently Asked Questions about Dissolution

1. What is the company dissolution process?

Company dissolution, often referred to as ‘strike off,’ is the procedure for shutting down an unwanted company and removing its name from the register held at Companies House. The dissolution process is initiated by the company’s directors, who submit a DS01 form and pay the relevant fee. A notice is subsequently published in the Gazette, announcing the company’s intention to strike itself from the register. If there are no objections received during the specified period, the company will be dissolved. However, if an objection is raised, the process will be suspended, and the company will remain registered.

2. Is dissolution right for my business?

Dissolution is not a formal insolvency process, and it may not be suitable for companies with outstanding debts or liabilities. If a company owes money, creditors are likely to object to the strike-off application, as the dissolution process would prevent them from pursuing the company for the outstanding amounts. In such cases, if the company needs to be closed and there are outstanding debts, a more appropriate solution would be to consider a voluntary liquidation process, such as a Creditors’ Voluntary Liquidation (CVL). This ensures that creditors are treated fairly and in accordance with insolvency laws while allowing for an orderly closure of the company.

3. What happens after my company has been dissolved?

Dissolution is a process designed to bring about the end of an unwanted company. Once a company has been dissolved, it ceases to exist as a legal entity, trade stops, and its name is removed from the Companies House register. Dissolution is generally considered a serious and permanent step, as reversing it is a costly and time-consuming process. If there is a possibility that you may want to use the company or its name in the future, an alternative option could be registering the company as dormant instead of dissolving it. This would keep the company in existence without active trading. 

Is dissolution the same as liquidation?

Dissolution and liquidation, though both leading to the closure of a company, represent distinct processes. Dissolution offers an informal means for a solvent yet unwanted business to conclude its affairs. Directors can manage the entire process without involving an insolvency practitioner. However, if the company possesses debts, the dissolution application may face challenges. Dissolution is suitable for straightforward cases, but for those involving substantial assets or debts, a formal liquidation process is more appropriate. In the case of solvent companies, liquidation is accomplished through a Members’ Voluntary Liquidation (MVL), while a Creditors’ Voluntary Liquidation (CVL) is employed to close insolvent companies.