Sometimes a company has been incorporated and its purpose has run its course or the expected reason for the company has been removed. Often these companies will remain dormant within larger groups of companies for years; yet the company secretarial services still need to be carried out and the directors are still liable for any issues around the company. It therefore makes sense to strike off any companies that are no longer needed as in the long run it will save time and money as well as reducing the risks to the officers.
To provide an estimate of the size of this issue, last year approximately 50,000 more companies were incorporated than were struck off the register. In what is generally accepted to be a stagnant economy at the moment, it is hard to imagine that these companies are all being used for commercial purposes. Many are likely sitting dormant and costing their owners time and money.
Striking off a company from the official register is a procedure that is available to dormant companies that are not insolvent. It is much cheaper and quicker to go through a striking off procedure than a full insolvency and is a relatively simple way to close a company down.
It has the advantage that, if done properly, it removes the costs and potential liability associated with an ongoing company and ensures that there is no blemish against the directors name for a company being struck off incorrectly. Although, striking off a company does not remove any liabilities that would otherwise have attached to the directors, officers or members.
It is carried out under section 1003 Companies Act 2006 and, in order to be eligible, the company must not have done any of the following in the preceding three months:
- traded or otherwise carried on business;
- changed its name;
- made a disposal for value of property or rights that, immediately before ceasing to trade or otherwise carry on business, it held for the purpose of disposal for gain in the normal course of trading or otherwise carrying on business. For example, a company in business to sell oranges would not be able to continue selling apples during the three month period but it would be able to sell the truck it once used to deliver the apples; and
- engaged in any other activity except one which is necessary or expedient for the purpose of:
- making an application for strike off or deciding whether to do so (which would include contacting Elemental CoSec to discuss the striking off procedure);
- concluding the affairs of the company;
- complying with any statutory requirement.
As part of the process, the directors need to confirm that the above has been complied with and this can be a complicated area. It is also a fairly long process as it involves publishing notices in the Gazette to inform any potential creditors of the striking off procedure. It is therefore recommended that you get expert advice before starting down this route.
If you would like any advice or assistance on striking off a company, then please get in touch with Elemental CoSec. They are professional providers of company secretarial services and the can advise on removing a company from the register.
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