What Is Voluntary Company Strike-Off?

Voluntary company strike-off allows company directors to shut down their company themselves, ceasing its existence as a legal entity without the need for outside assistance.

Depending on the situation the business finds itself in, a company strike-off can be a solid choice. However, if the company is insolvent, or has many assets, you may want to consider something else. Strike-off may not be as cost-effective as other options, or it may result in the failure to uphold your duties as director of an insolvent company.

In this guide, we’ll be explaining the process of voluntary company strike-off, the potential advantages it holds, and taking a look at the alternatives.

What Is the Process of Voluntary Company Strike-Off?

Applying to have your company voluntarily struck off is an easy and straightforward process. You simply need to complete a DS01 form, making sure that it is signed by the majority of your company’s directors. You’ll need to pay an £8 application fee when applying online, and a £10 application fee when applying by post.

Once you’ve sent your application, you’ll have 7 days to inform any potentially interested parties:

Employees
Shareholders
Creditors
Directors (who haven’t signed the form)
Trustees of the pension fund

It’s important you do this or you could end up facing fines or prosecution.

A notice of your business’ impending strike-off will be advertised in The Gazette, the official public record. This will give any interested parties – such as creditors – a chance to object to the process. If no objections are raised, the company will officially be struck off after 2 months, ceasing to exist as a legal entity.

What Happens to Company Assets During Voluntary Company Strike-Off?

One important point to remember when striking off your company is the handling of your company’s assets. When you apply for strike-off, you need to make sure that your assets are realised to be shared between your creditors before the company is struck off.

Once the company is removed from the register, it will no longer exist as a legal entity – therefore, any assets belonging to the company technically have no owner. As a result, they’re treated as “bona vacantia”, meaning ‘vacant goods’. Assets with no owner are automatically passed to the Crown.

If your assets have been assumed by the Crown, you’ll have to apply to have your company reinstated by court order. You can do this by completing form N208. If your company has not yet been dissolved, you can submit form DS02 to halt the process.

What Are the Legal Risks of Voluntary Company Strike-Off?

If you strike off a company that is insolvent, you could find yourself in hot water. Some believe striking off a company is a good way to avoid repaying company debts as, after all, if there is no company then there is nothing to make a claim against.

However, this is not the case. Even if your creditors don’t initially object to your company being struck off during the two-month notice period, they can still apply to have your company reinstated.

If you strike off your company to avoid having to deal with debts owed to company creditors, you’re failing to uphold your duties as the director of an insolvent company. It could be viewed as an attempt to keep creditors from what they’re owed, which could lead to accusations of misfeasance.

Misfeasance charges can result in:

Disqualification from future directorship
Being made personally liable for company debts
Receiving large fines
Imprisonment (in severe cases)

If your business is insolvent, you’ll need to pursue another route of closure.

What Are the Alternatives to Voluntary Company Strike-Off?

Creditors’ Voluntary Liquidation (CVL)

If you’re the director of an insolvent business, you should pursue a Creditors’ Voluntary Liquidation. This is an effective route of company closure which allows you to repay your company creditors while securing yourself a safe exit from the business:

Repays creditors through the sale of company assets
Safeguards you from creditor legal action
Any remaining debts are written off

While a CVL does need to be carried out by an insolvency practitioner – attracting some professional fees – the fees are typically covered by the proceeds raised from the liquidation of company assets. Getting a CVL helps ensure you are adhering to your directorial duties, protecting you from legal and financial fallout.

Members’ Voluntary Liquidation (MVL)

If you’re looking to close a solvent company, you may want to consider a Members’ Voluntary Liquidation.

When you strike off your company, any returns under £25,000 are subject to Capital Gains Tax. However, any amounts over this are subject to full Income Tax. If you’re liquidating a company with a lot of assets, an MVL offers a range of benefits:

Amounts over £25,000 are subject to Capital Gains Tax only
Capital Gains Tax is applicable only to the profit made on the sale of an asset, not the entire amount received
May be eligible for Business Asset Disposal Relief, cutting down tax repayment even further

An MVL must be carried out by a licenced insolvency practitioner. While this does mean you’ll have to pay some fees, the savings offered by the process more than make up for it.

Speak to an Expert Today

If you’re a company director looking to close down your company, you should seek the assistance of an insolvency practitioner, like those of our team.

Our practitioners can assess your situation and guide you to the best possible solution for you; we may suggest you pursue a formal insolvency procedure or reassure you that a voluntary strike-off is the best option for you.

Get in touch today to book a free consultation.