Compulsory Strike-Off Action Has Been Discontinued - What Can I Do?
If you’re looking to close your company, learning that your compulsory strike-off action has been discontinued can be very alarming.
If you have taken no action to halt the compulsory strike-off, it’s likely that one of your creditors has objected to the process and stopped it in its tracks.
This can have major legal and financial consequences for you personally – not just for your business.
In this guide, we’ll explain how the compulsory strike-off process works, why the compulsory strike-off may be discontinued, and how you can protect your interests.
Contents
What Is a Compulsory Strike-Off?
A compulsory strike-off takes place when a company is forcibly removed from the Companies House register, ceasing its existence as a legal entity.
Companies House usually initiates the process as a result of a business:
- Failing to file its company accounts on time
- Not updating changes to its registered office address
- Failing to appoint a company director
- Not responding to Companies House correspondence
- Not actively trading
Companies House will send you a letter to notify you why your company is due to be struck off. If you don’t do anything, it will be removed from the register after 2 months.
For some directors, compulsory strike-off isn’t a cause for concern. Instead, it offers a cost-free, hands-off route to company closure, where Companies House shuts the business for them.
However, it isn’t always an appropriate option. Businesses with assets face losing what they own to the Crown, while insolvent business directors risk facing a range of legal and financial problems.
Why Might a Compulsory Strike-Off Be Discontinued?
There are a few reasons why a compulsory strike-off might be discontinued.
Typically, it is the result of the company directors taking action to resolve the issue highlighted by Companies House so that they can save the business and carry on trading.
However, this isn’t always the case. Sometimes it is the work of the company’s creditors.
When Companies House makes a compulsory strike-off petition, it must place a 2-month notice in The Gazette, the UK’s official public record. This advertises the company’s imminent closure and gives interested parties the opportunity to object.
Creditors are liable to object to a compulsory strike-off if your company still owes them money. This is because they can’t pursue a non-existent company for debt. If they do object, it can have some nasty legal and financial consequences for you as a director.
What Are the Potential Consequences of a Discontinued Compulsory Strike-Off?
If you’ve discontinued the compulsory strike-off yourself, then you don’t have much to worry about. Your company can continue trading, and your limited liability will remain intact. Simply ensure you keep up with regulations to ensure it doesn’t happen again.
However, it’s a different story if a creditor has discontinued the compulsory strike-off.
The creditor will likely be keen to pursue their debts and may issue a winding-up petition to force your business into liquidation. Unlike strike-off – which simply closes the business – liquidation sells the assets of a company in order to settle its liabilities.
Unfortunately, compulsory liquidation also results in an investigation into the director’s professional conduct. The investigator will want to ensure you’ve upheld your duties to creditors and protected their position to the best of your ability.
Allowing your company to be struck off may be interpreted as an attempt to stop your creditors from getting what they’re owed. This can result in misfeasance charges.
Misfeasance carries a range of potential penalties:
- Made personally liable for company debts
- Large court fines
- Disqualification from directorship (for 2-15 years)
To avoid this, you must settle the company’s affairs properly.
What Can You Do if Your Compulsory Strike-Off Action Has Been Discontinued?
If your compulsory strike-off action has been discontinued, there are a few options available for you to explore.
Each solution is best suited for different situations, so you should speak to an expert before settling on anything.
Paying Off Your Creditors
If you have the funds to repay your creditors, then this is the most obvious option.
Paying off your debt spares the need for expensive litigation or professional help. It will also resolve any disputes with creditors, so you won’t have to worry about facing any scrutiny of your conduct later down the line. This means you’ll be safe from misfeasance charges.
Once you’ve paid them off, you can pursue the closure of your company via a voluntary strike-off. You’ll need to complete form DS01 to do this.
Of course, this option isn’t appropriate for everyone. Don’t worry, though – if your company lacks the funds to pay its debts, there are still options available to you.
Creditors’ Voluntary Liquidation (CVL)
A Creditors’ Voluntary Liquidation closes your company so that its assets may be sold to help repay your creditors.
The most common form of company closure in the UK, the process offers a range of benefits to directors:
- Upholds your directorial duty
- Safeguards you from misfeasance charges
- Relieves pressure from creditors
- Potential for you to claim redundancy
- Cost of procedure is usually covered by liquidation proceeds
A CVL’s main benefit is that it offers a safe exit from the business. Once the process is complete, any remaining debts will be written off, allowing you to move on with your future.
Company Voluntary Arrangement (CVA)
If you wish to keep trading, a Company Voluntary Arrangement is a solid choice. It functions as a repayment plan between you and your creditors, which deals with debts while protecting your company from liquidation.
- Stretches out repayments over 3-5 years
- Greatly reduces monthly overhead
- Protects the company from creditor legal action
- Freezes interest on debt
If you’re set on closing your business, then this option probably isn’t for you. However, if you’re simply suffering from a gap in your balance sheet, then a CVA can be a major lifeline.
You’ll need the backing of 75% of your creditors (by value) to enter into a CVA. Our team will help you to create a proposal that is functional for you and attractive for creditors.
Speak to an Expert
If you’re struggling with company debt, you should speak to an insolvency practitioner as soon as possible.
Our team can assess your situation and guide you to the best solution for you. A formal insolvency solution will help to protect your legal and financial interests, keeping debts with the company rather than carrying them over to you.
Get in touch today to book a free consultation.
