What is a strike-off?

by Stephen Conmy on Jan 17, 2022

What is a strike-off

What is a strike-off? The term sounds quite dramatic, and it is – it refers to the removal of a limited company from the register of companies. A strike-off prevents the business from trading, making payments, and selling assets.

Before a strike-off, a company will publish a notice informing interested parties that it will cease trading within a specific timeframe. After proving there are no objections, the company will be struck off. If the company meets certain criteria, such as being solvent, having no outstanding legal actions against it, and not changing its name in the last three months, then a voluntary strike-off can commence.

What happens after a company is struck off?

As soon as the name is struck off, it becomes available for other companies to use, and the owners can no longer engage in any other business activities under the company name.

Before a company can be struck off, however, all employees should be made redundant, any monies due to the company should be paid, the company’s assets should be sold, and final accounts should be prepared. The company should also pay all its tax liabilities and close its bank accounts.

What is a voluntary strike-off?

There are a variety of reasons why a business would want to be struck off voluntarily. Maybe the directors are planning to retire and have no successor, or perhaps there is a reorganisation within a group of companies, or perhaps the business is no longer profitable.

It could also be that the directors disagree or market conditions are not favourable and it is time to call it a day.

Nevertheless, not all strike-offs are voluntary; some are mandatory and can be initiated by the company registration office where there is repeated non-compliance, for example, with filing annual accounts.

Interestingly, for a company to be struck off, it must be solvent. If a company is in debt or undergoing an insolvency procedure, it cannot be struck off.

Upon involuntary strike-off, the assets of the company become state property, and its limited liability ceases to be protected.

Can a company that is struck off be restored?

It is also possible for a struck off company to be reinstated, but it is not always a simple process. A company can be administratively restored if it has been struck off for less than 12 months. 

Court action could be required if more time has lapsed, which could take a long time and be expensive. It is possible for a court to order the reestablishment of a dissolving company within 20 years of its dissolution.

It is possible that any interested parties may object to the dissolution of a company. These could be directors of the company or creditors where there are unpaid debts.

A strike-off can be suspended 

There is a possibility that all interested parties, such as employees or trustees, are not informed about the impending strike off, or that an action has been taken to recover money from the company. In cases such as these, an interested party may be able to have the strike-off suspended.

In conclusion, involuntary strikes-off are best avoided, but voluntarily striking-off is a viable option, especially if market conditions have changed, or if a director is retiring without a successor in place.

company law
strike off

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