Why would a company strike off be suspended?
To ‘strike off’ a company means that a company is removed from the Companies House register. This happens for various reasons. The company might be dormant or the company directors might choose to cease trading. The process of striking off a company can be suspended under certain circumstances. We’ll discuss the reasons why a company strike off could be suspended and the implications it has for the company and its stakeholders.
What is a strike off?
A strike off can happen voluntarily, where the company’s directors decide to cease trading and close the company. Or compulsorily, where Companies House takes action to remove the company from the register due to non-compliance with its statutory requirements. Once a company is struck off, it ceases to exist as a legal entity and its assets become the property of the Crown.
Reasons for suspending a strike off
There are a few reasons why a strike off may be suspended. Some of the most common reasons include:
1. Objections from interested parties
Any interested party – such as a shareholder, creditor, or employee – can object to a company’s strike off, if they believe it should not be removed from the register.
The most common reasons for these objections include:
- The company is still trading or has outstanding debts
- The company is involved in ongoing legal disputes
- The company has not complied with statutory requirements, such as filing annual returns or accounts
- The company’s directors have not informed all relevant parties of their intention to strike off the company
To make the objection, they need to submit a formal objection to Companies House. If Companies House receives a valid objection, they will suspend the strike off process and inform the company’s directors. The company will remain on the register until the objection is resolved or withdrawn.
2. Ongoing legal proceedings
If a company is involved in ongoing legal proceedings, such as a court case or investigation, the strike off process may be suspended until the matter is resolved. This is because the company needs to remain on the register as a legal entity to participate in the legal proceedings.
3. Non-compliance with statutory requirements
Companies House may suspend a strike off if the company has not complied with statutory requirements, such as filing annual returns or accounts. In this case, the company’s directors must ensure that all outstanding documents are submitted to Companies House before the strike off can proceed.
4. HM Revenue & Customs (HMRC) objections
HMRC can object to a company’s strike off if they believe the company has outstanding tax liabilities or if the company is part of an ongoing tax investigation. In this case, the strike off will be suspended until the tax issues are resolved or the investigation is completed.
5. Unpaid Bounce Back Loan (BBL) or Covid Business Interruption Loan (CBIL)
The government loan schemes provided a vital lifeline to many UK businesses during the pandemic. But the continued economic uncertainty has meant that thousands of these businesses are now struggling to get back on their feet and make their BBL or CBIL repayments.
Should a business have either of these loans outstanding and attempt to close their company with money owing, Companies House, working with other government organisations, has the power to suspend a strike off and investigate the company director(s) for attempting to avoid paying their debts. There have been many director’s disqualifications and even prison sentences handed out as a result of this.
The suspension of a strike off can be avoided
The vast majority of companies are able to go ahead with their strike off with no issues. However, it’s crucial for company directors to be aware of these potential obstacles, so that they can take any action necessary to avoid them. If a strike off is suspended, the company directors must continue to carry out their legal obligations and address the reasons for the suspension. Failure to do so can have significant consequences for the company’s directors, shareholders and creditors.
If you consult a licensed insolvency practitioner before you make the decision to strike off your company, especially if you have a BBL or CBIL, we can help you address any issues promptly and make sure you comply with your legal requirements.
If you think your company could benefit from the advice of a licensed insolvency practitioner, our expert team is on hand to take your questions. We don’t have a call centre. Instead, when you get in touch you’ll speak to someone who has the expertise to give you the answers you need. We’ll explain your options and you’ll decide on the best way forward.