Where a company is to be closed down a decision may be made to remove it from the Companies Register. This is known as “striking off”. Striking a company off the register may be either voluntary or involuntary i.e. compulsory. This article will focus on the latter scenario, whereby the striking of a company from the register is imposed by Companies House. Here we will explain:
- What is meant by a compulsory strike off;
- The legal basis for a compulsory strike off;
- When a company might be subject to a compulsory strike off … and:
- How to object to a compulsory strike off, i.e. how to stop it.
What is meant by a compulsory strike off?
A compulsory strike off occurs when Companies House makes the decision to remove a company from the Companies Register where it is no longer believed to be actively trading. The Registrar of Companies has the power to seek a compulsory strike off under section 1000 or section 1001 of the Companies Act 2006 (CA 2006).
Section 1000 of the CA 2006
Section 1000 of the CA 2006 gives the Registrar the power to strike a company off where they believe that it is no longer operational. It is important to note that Companies House has the power to seek a strike off without the consent of the company’s directors. Section 1000(1) states:
“If the Registrar has reasonable cause to believe that a company is not carrying on business or in operation, the Registrar may send to the company by post a letter inquiring whether the company is carrying on business or in operation”.
Section 1001 of the CA 2006
Section 1001 of the CA 2006 gives the Registrar of companies the duty to act if a company is being wound up and:
- no liquidator is acting or the affairs of the company are fully wound up, and
- the returns required to be made by the liquidator have not been made for a period of six consecutive months.
In these circumstances, the Registrar will send the company or liquidator a notice of strike off with a deadline date. If by that deadline a response is not received from the company or liquidator, giving good reason why this should not happen, then the company will be struck off the Companies Register and dissolved.
In what circumstances will Companies House seek a compulsory strike off?
There is no legal definition provided within the CA 2006 for the terms “not carrying on business” and “in operation”. Companies House do, however, provide some guidance on this matter. They state that they will begin the process of compulsory strike off if:
- The company’s compulsory filing requirements have not been met, e.g. the non-submission of confirmation statements or accounts.
- Correspondence sent by the Registrar to the company’s registered office has been returned undelivered.
- The company no longer has any Registered directors.
What is the procedure for a compulsory strike off?
The procedure followed by Companies House when striking off a company from the Companies Register differs depending upon whether they are relying on section 1000 or section 1001.
Section 1000 procedure for striking off
- Companies House sends a communication to the company asking whether it is still actively trading.
- If no response is received within 14 days then a second communication is sent explaining that no response has been received and, if no response is received within a further 14 days, then the company will be struck off.
- If no response is received within 14 days of the second communication, or if confirmation is received that the company is no longer active, then a notice will be published in the Gazette. The notice will explain that, two months after its publication, the company will be struck off the Register and the company dissolved.
- Two months after the notice is published the company will be struck off and dissolved, unless the company provides sufficient evidence as to why this should not happen.
- If the company is struck off then this event will be published in a further notice in the Gazette.
Section 1001 procedure for striking off
- Companies House publish a notice of a pending strike off in the Gazette. This is sent to the company or liquidator, explaining that the company will be struck off the Companies Register and dissolved two months from the date of the notice unless it can be demonstrated why this should not happen.
- After two months Companies House will strike off the company’s name, assuming that it has not been demonstrated why this should not happen.
- A final notice is published in the Gazette to confirm that the company has been struck off and dissolved.
How can I stop or object to a compulsory strike off?
The process for objecting to a compulsory strike off differs depending on whether the company or a third party intends to stop the process.
Process whereby a company may stop a compulsory strike off
Where a company has been informed by Companies House that it will be struck off, but its members want to stop the process, then they must:
- Respond to the notice as soon as possible, explaining and demonstrating that the company is still trading. It is important that this is done by the deadline on the notice. It is also recommended that you explain why any annual reporting requirement (e.g. confirmation statement and annual accounts) has not been met and what is being done to prevent this from happening in the future.
- Submit to Companies House both an up-to-date confirmation statement (CS01) and also the annual accounts.
- If more time is needed to meet your annual filing requirements then ask Companies House for an extension.
Process whereby a third party or creditor may stop a compulsory strike off
The challenge for third parties and creditors is that there is no requirement for Companies House to inform them of a pending strike off. Third parties and creditors can, however, check the company’s record at Companies House. Doing so will allow them to verify whether a company has already missed its filing deadlines and is, therefore, likely to be subject to an involuntary strike off.
It is important to note that, under sections 1000(4) and 1001(2) of the CA 2006, the right to stop a strike off rests mainly with the company itself.
Sections 1000(4) and 1001(2) of the CA 2006 both state: “At the expiration of the time mentioned in the notice, the Registrar may unless cause to the contrary is previously shown by the company, strike its name off the Register”.
In addition, Companies House explains that interested parties can only object to a strike off where the strike off was entered into voluntarily by the company.
This does not mean that third parties and creditors are powerless in this situation. It is important to seek legal advice from a company law specialist who can draft a letter explaining why you, as a creditor or third party, object to the strike off. The Registrar will normally take such third party views into account when deciding whether to proceed with a strike off. They may then either proceed with the strike off or suspend the action until the objection is resolved. This will not guarantee that the strike off process will be stopped but it will give you a chance to halt the process temporarily. A strike off objection might be taken more seriously by the Registrar if it is made clear that the intention is to allow a third party or creditor time to petition for the company to be wound up. This may reassure the Registrar that the intention is to close the company and not leave it trading on an open-ended basis.
Even when a company has been struck off it may be possible for creditors to apply to the court to have the company restored to the Companies Register. At this point they can then consider bringing insolvency or other legal proceedings against the company. Part 31 of the CA 2006 provides two procedures for the restoration of dissolved companies to the Companies Register: Administrative restoration and restoration to the Register by a court order.
With a comprehensive understanding of the CA 2006 and the processes followed by Companies House it is possible to halt the process of a company being struck off. If you need assistance in preventing your company from being struck off by Companies House, or if you are a creditor or third party who wishes to object to a pending strike off of another company, it is important to seek legal advice from a company law specialist.
Uniwide Formations specialises in the registration of limited companies and LLPs and can advise you on all aspects of company formation and filing. As professional business service providers we can offer you also a wide range of related services, including the voluntary striking off of a company.