In the case of a company receiving notice of an active or standing proposal to strike off, quite a bit of confusion may be found – especially if this active proposal was not performed in a voluntary manner by the directors and shareholders of said company.
However, before making any moves, it is vitally important for all parties involved to understand what exactly being struck off means, and what the active proposal or petition to strike off signifies for the company as a whole.
An active proposal to strike off means that the companies house branch of the government has received or formed a petition to have the companies’ name and legal rights removed or “struck off” from the register of said companies house, essentially dissolving the company in its entirety.
What is a Strike Off?
A strike off is simply the act of the companies house removing a company from its register – hamstringing it in practically every way and essentially shutting down the company.
The company that has been struck off will be unable to possess any assets or funds (apart from the case of voluntary liquidation), will be blocked from trading as well as unable to continue any other forms of regular operation save for those that directly involve the winding up of affairs in order to facilitate the company’s shut down.
Striking off is also referred to as winding up and occasionally dissolution, though the term dissolution can also refer to a similar but different process, depending on the particular geographical origins of the dissolved company.
What is the Difference Between Compulsory and Voluntary Strike Off?
As can be inferred by the difference in their names, the primary distinction found between a compulsory strike off and a voluntary strike off is in the company’s directors and shareholders personally filing the active proposal to be struck off.
In the case of a compulsory strike off being petitioned, it is likely due to the companies house itself giving fair warning to a company that it has not submitted or disclosed financial accounts and other pertinent information involving the operations and finances of the company.
This, apart from ultimately ending in the dissolution of the company, will also come with fines and, in the worst possible case, legal action against the directors of the company.
If the strike off is considered voluntary, however, all the directors and shareholders of the company need to do is allow the deadline of response to pass – all the while ensuring that no creditors or other related parties object to the strike off – so as to allow the companies house to fully dissolve said company.
Future Strategy notes that a strike off is not always possible, as in the case of unpaid liabilities or outstanding legal matters will ultimately lead to the companies house either suspending or stopping the active proposal to strike off the company.
Who Petitions for a Strike Off?
Depending on whether the strike off is compulsory or voluntary, the particular individual or party responsible for the active proposal to strike off can differ quite widely – alongside the procedure and ramifications of said strike off.
In compulsory strike offs, it is usually an external third party that is responsible for the proposal to dissolve the company – with the majority of cases being directly from that of the companies house itself.
However, it is also possible for the constituent members of a company such as the board of directors and the majority shareholders to instead choose to cease the affairs of their company, initiating the process of a voluntary strike off.
This is done by the company or its representatives submitting what is known as form DS01 or the voluntary strike off form, of which will be sent to the companies house once the deadline of the active proposal to strike off has been completed.
Does an Active Proposal to Strike Off Mean that the Company is Dissolved?
In the event that a company has received notification of an active proposal to be struck off, it does not yet mean that the company itself has already been struck from the register of the companies house.
This is due to the fact that the companies house provides a length of four weeks or approximately one month so as to allow any objecting parties to make themselves known, as well as to give the shareholders and directors of the company to be dissolved sufficient time to formulate a response.
Apart from this active proposal being submitted to the company and any internal parties that may need it – creditors of the company such as the HMRC or independent lenders may also be notified, either through a notice that is posted in the gazette or personally by the companies house itself.
This is done so as to ensure that the affairs of the company to be dissolved are tidied up in a manner that is efficient enough for all parties involved, as well as to ensure that any creditors wishing to be repaid are not left at a loss in the event that the company is dissolved without their knowledge.
Who Enforces the Active Proposal to Strike Off?
The active proposal to strike off a company is primarily enforced by the companies house, but may also be upheld by agents from a court of law, as it is only these two parties that are vested with the ability to dissolve a company in its entirety.
How Long Does an Active Proposal to Strike Off Last Before Taking Effect?
In most cases, the active proposal to strike off will provide a grace period of four weeks from the date that it is issued to the company – regardless of whether the company’s shareholders and directors have become aware of it or not.
This is not to say that the companies house will not make efforts to ensure that all entities involved are aware of the active proposal to strike off, however, and it is quite unlikely that a company’s directors will be left ignorant of such proceedings involving their own company.
And though the grace period of four weeks is standard in the situation of a compulsory strike off for a company, the length of time in which a company must be dissolved when being voluntarily struck off has no limit in any manner.
However, if the company has filed form DS01 and made the companies house aware of their intentions to be voluntarily dissolved, a time limit of up to six months may be allotted in the case of the company retaining outstanding debts and liabilities.
This is to ensure that all debts of the company are repaid fully prior to its subsequent dissolution, preventing unpaid debts from being left in a floating status or any legal action taking place that may delay the striking off from taking effect.
Can an Active Proposal to Strike Off be Stopped?
An active proposal to strike off may be cancelled either by an objecting party with a valid reason such as a creditor or by the companies house itself in the event that the company has complied with their requests, of which are likely the submission of financial accounts and other pertinent information.
A voluntary strike off may be stopped by simply submitting the proper files in the relevant channels of the companies house, a process that should be quite straightforward so long as the majority shareholders and directors are in agreement about the cancellation of the dissolution petition.
In order for a company to cancel an active proposal to strike off in the case of compulsory striking off, the directors of said company or any subsequent representatives must immediately open communications with the companies house, wherein they will investigate the case and determine whether dissolution is appropriate or not.
Can Creditors Stop an Active Proposal to Strike Off?
Yes, a creditor or group of creditors may file an objection to an active proposal to strike off with the companies house – of which will always suspend or entirely halt the striking off of the company, whether voluntary or compulsory in nature.
This is allowed by the companies house due to the nature of the company shutting down, wherein its assets and funds will be both frozen or placed within the ownership of the crown, leaving the creditors with a bad debt and no way to be repaid, even if the directors of the company are taken into claims court.
As such, it is the intention of the companies house to not only notify the company of an active proposal to strike off, but to also notify the creditors of said company so as to allow them sufficient time to tidy up their affairs, whether that takes the form of direct payment or lengthy court battles.
Does an Active Proposal to Strike Off Show Up in The Gazette?
Regardless of whether the strike off is of a voluntary or compulsory nature, a notice of the company’s intention to dissolve will be placed in the gazette after sufficient time has passed since the disclosure of the active proposal to strike off.
This is to ensure that any concerned parties and other forms of related entities are made aware of the company’s situation, its future, and are given the opportunity to place an objection with the companies house if they so desire.
What does an Active Proposal to Strike Off Look Like?
An active proposal to strike off will usually take multiple forms so as to ensure that all concerned parties are kept apprised and aware of the procedure.
These can take the form of physical mail being sent to the registered mailing address of the company, emails sent to their registered email address, direct phone calls from the companies house and even official postings on the register website of the companies house itself.
This, of course, is in combination with the official notices that are posted in the gazette, as well as external parties related to the company also receiving word of the active proposal to be struck off.
Can a Dormant Company Receive an Active Proposal to Strike Off?
Though the subsequent dormancy of a company can be due to a variety of reasons unrelated to being struck off by the companies house, it is still possible for the directors of said dormant company to desire to fully wind up the company’s affairs by way of submitting an active proposal for voluntary striking off.
The same rules apply in the event that a dormant company has filed an active proposal to be struck off, wherein the dissolution of the company will be suspended or cancelled in the event of an external party filing a valid objection or if creditors and liabilities are still left unpaid.
1. Unknown Author. (N.D.) “Strike off your limited company from the Companies Register” United Kingdom Government. Retrieved on 6 February 2022 from (https://www.gov.uk/strike-off-your-company-from-companies-register/apply-to-strike-off)
2. Unknown Author. Bona vacantia, Crown disclaimer and escheat: issues in liquidation, dissolution and restoration | Practical Law. Practical Law. Published 2022. Accessed February 6, 2022. (https://uk.practicallaw.thomsonreuters.com/w-007-3468?originationContext=knowHow&transitionType=KnowHowItem&contextData=(sc.Default)&comp=pluk)
3. Unknown Author. (N.D.) “Apply to strike off and dissolve a company” United Kingdom Government. Retrieved on 6 February 2022 from (https://find-and-update.company-information.service.gov.uk/close-a-company/)
4. Schillig, M. (2016-03-10). Winding-Up and Liquidation. In Resolution and Insolvency of Banks and Financial Institutions. : Oxford University Press. Retrieved 6 Feb. 2022, from https://oxford.universitypressscholarship.com/view/10.1093/oso/9780198703587.001.0001/isbn-9780198703587-book-part-19.