Company dissolution is a formal process whereby a company is closed down and removed from the official register at Companies House. This process is also referred to as ‘striking off’ a company. When a company has been officially dissolved, it ceases to exist as a separate legal entity and can no longer trade.
In this post, we look at company dissolution in detail, including why you might dissolve a company, the difference between voluntary and involuntary strike-offs, eligibility criteria, and how to make a company dissolution application.
Company dissolution is often a voluntary process initiated by directors. However, as the official registrar of companies in the UK, Companies House has the power to dissolve companies by force.
This is known as involuntary dissolution. It usually happens when a company fails to maintain certain statutory obligations, such as filing confirmation statements , annual accounts, and tax returns.
There are many reasons why people choose to dissolve a company voluntarily. Some common examples are as follows:
Another common reason for voluntary strike-off is to avoid paying late filing penalties for missing the annual accounts filing deadline at Companies House.
When accounts are overdue, the company will automatically incur a fine when it eventually files them. So, rather than delivering their annual accounts after the deadline and paying a late filing penalty, some people dissolve their companies instead. Surprisingly, Companies House permits this.
These are just a few examples to give you a general idea of why someone might dissolve a limited company. Ultimately, it will be because the directors or members decide the company is no longer required.
You don’t need to provide Companies House with a reason when applying for voluntary company dissolution.
Involuntary dissolution (forced dissolution by Companies House) occurs if the registrar believes the company is no longer in business or carrying on operations. Companies House may take this view if:
Companies House will take all reasonable steps to determine if the company is still operating before moving to dissolve it.
Before applying for company dissolution, you must close down the business legally. To do so, you will need to carry out the following steps:
Any business bank accounts in the company name that remain open will be frozen from the date of dissolution. This is why it is essential to transfer credit balances, close your company bank accounts , and transfer ownership of any other business assets before applying to dissolve a company.
If you fail to do so, everything will pass to the Crown. You will need to restore the company to get these assets back.
To dissolve a company voluntarily, the directors (or a majority of them) must give their formal approval by passing a board resolution . This can be done by voting in person at a board meeting or remotely via written resolution.
However, some companies may include different provisions in their articles of association or shareholders’ agreement, whereby the members must approve any striking-off application. Check your articles and shareholders’ agreement beforehand if you’re unsure.
If a majority of the directors (or members) approve the dissolution, they can apply to Companies House on form DS01.
The form must include the following details:
You can file the form online via the Companies House WebFiling service or send it by post. You must include the filing fee of £33 (online application) or £44 (postal application).
Alternatively, you can ask Rapid Formations to take care of this for you by purchasing our Company Dissolution Service . This service is available to existing clients and non-clients alike. Priced at just £89.99 plus VAT, we’ll take care of your company’s dissolution from beginning to end, ensuring everything goes as smoothly as possible.
The business must meet certain criteria to be eligible for voluntary company dissolution. These conditions are set out in section 1004 and section 1005 of the Companies Act 2006.
You can only apply to strike off a company if it:
*For example, if your company was in the business of selling flowers, you would be prohibited from selling flowers during the three months before making a company dissolution application, but you would be permitted to sell the van that you previously used to deliver your flowers.
If you are a director, you must not resign before making a company dissolution application. You must be a director of the company when the registrar receives your application.
Once your company dissolution application has been received, Companies House will examine it. If the form is acceptable, the registrar will take the following actions:
Provided that no objections are raised and there are no reasons to delay the dissolution, Companies House will strike off the company from the public register not less than two months after the date of the notice.
The company will be dissolved, and another notice will be published in The Gazette stating that the company has been struck off.
The Gazette is the official journal of record in the UK. There are three publications, each of which announces statutory notices, including company strike-off and restoration notices, relevant to one of three UK jurisdictions:
When Companies House publishes a strike-off or restoration notice, it appears in the weekly Gazette for the part of the UK where the company is registered.
Within seven days of filing your striking-off application, you must send a copy to anyone who may be affected by the company’s closure. This includes the following:
You also need to send a copy of the striking-off application to anyone who, at any point after making the application, becomes one of the following in relation to the company:
You’ll need to do this within seven days of the person assuming one of these positions relating to the business.
Once you have filed a company dissolution application at Companies House, it typically takes two to three months for the company to be struck off the register. This is due to the two-month period set aside for interested parties to make an objection following the publication of the dissolution application in The Gazette.
Even after a company has been dissolved, Companies House will continue to hold information on it. Furthermore, company formation and dissolution files will remain on the public register for 20 years after a company has been struck off.
After 20 years, Companies House has an agreement to transfer a selection of dissolved company records to The National Archives (TNA) .
TNA will direct the registrar to destroy any records that haven’t been transferred. The public can request any company documents that are transferred to The National Archives.
Following the UK government’s response to the Corporate Transparency and Register Reform consultation , Companies House has:
Previously, the registrar removed records of dissolved companies from the service six years after the date of company dissolution. These records are now available for 20 years on other Companies House products for a fee.
Dissolving a company is suitable for a solvent company that is no longer trading. It is a voluntary procedure and the most appropriate if the company’s situation is straightforward and it can pay its debts.
Conversely, liquidation occurs when a company is facing financial difficulties and can’t pay its debts, or when the total of its liabilities is greater than its assets. Liquidation is often the only course of action available for closing an insolvent company.
Company liquidation is a formal procedure requiring the appointment of a licensed insolvency practitioner (or official receiver) as a liquidator. They will take charge of the company from its directors and run the entire liquidation process.
If the directors of an insolvent company continue trading when the business enters insolvency, they can be held personally liable for some or all of the company’s debts. They may also face director disqualification and prosecution.
Dissolving a company without debts is relatively straightforward. However, if the company has debts with HMRC or other creditors that it can’t afford to pay, the creditors will most likely file an objection to the company dissolution application.
Creditors also have the right to object if they have any other viable reason. For example, if they believe the company has not been closed down with the correct information. They must do so within two months of the date of the notice in The Gazette.
In these situations, your company dissolution application will be rejected. You will need to initiate another type of closure suitable for closing a company with debt.
Different options are available for closing a company with debts (an insolvent company). Depending on your circumstances, you can:
If you’re unsure which of these options is most suitable for your company, you should seek professional advice from a solicitor, accountant, financial advisor, or authorised insolvency practitioner .
You can also contact Citizens Advice, Business Debtline , or the Insolvency Service helpline for free, impartial advice on dealing with your business finances and debts.
We hope this article has provided valuable insight into company dissolution in the UK, including the most common reasons for dissolving a company, the difference between voluntary and involuntary strike-offs, and how to make an application to Companies House.
If you have any questions or need help setting up or dissolving a company, please leave a comment below. Alternatively, contact our London-based team of experts.
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