Our advisors speak with company directors every day on this specific subject. Directors try to Strike-off (close their company), either via the companies house website or using form DS01, only to be confronted with a ‘voluntary strike-off action is suspended’ notice.
Why has my Strike-off application been suspended?
The number one reason a voluntary strike-off will get rejected is because a creditor has objected to it as they are set to lose money owed to them should the company be struck-off. This can be HMRC with unpaid tax, a bank with an outstanding loan or simply a supplier whose invoice has not been paid.
What’s the difference between Compulsory Strike-off and Voluntary Strike-off?
The main difference between voluntary and a compulsory strike-off is that company directors can initiate a voluntary strike-off themselves, whereas a compulsory strike-off can be initiated by third parties if there is an adequate reason. For example, overdue company accounts is probably the most common.
Don’t get struck off when you strike-off!
Directors need to be aware that willfully disregarding creditors; “knowingly” striking-off a company without giving them the chance to make their claim; can lead to serious consequences. To avoid potential repercussions, directors should take all necessary steps in good faith by informing parties of impending applications and allowing time for any claims against the business.
In December 2021, the Insolvency Service were granted new powers to tackle unfit directors who dissolve companies to avoid scrutiny and paying their liabilities, including Bounce Back Loan fraud. There are now mounting cases coming to the courts where a director has closed their limited company via strike-off only for the courts to re-open it and prosecute the director. It’s generally an easy case to prosecute as there is often little defence as the law is clear.
It’s a criminal offence to knowingly strike-off an insolvent company & not inform creditors
Let’s start with the legal part here first and then we can let you know what to do to fix it. Striking off a company is governed by part 31 of the Companies Act 2006. There are specific steps that need to be followed when closing a company or you run the risk of being banned as a director or worse; serving a prison sentence.
What is considered an offence when striking-off a company?
It’s an offence:
- to apply for company strike-off when the company is not eligible.
- to provide false or misleading information in, or in support of, a strike-off application.
- not to copy the application & inform all relevant parties within 7 days.
- not to withdraw application if the company becomes ineligible.
Potentially unlimited fines can be handed out at both, Sheriff and High courts if convicted. Anyone convicted of these offences may be disqualified from being a director for up to 15 years and face a criminal conviction with sentences reaching up to 7 years imprisonment.
The important point here is ‘knowingly’. Most director do not set out do be dishonest, they simply wish to close their company but fail to do so in the correct manner.
What to do first if you receive a strike-off action suspended notice
Fear not. If your company has just received a ‘voluntary strike-off application is suspended’ notice, then your company has not been closed down and you have some time to fix the situation.
The first and most important things you need to do is find out who submitted the objection and why. Contact Companies House directly and they will give you this information.
Next steps after receiving a strike-off acation suspended notice
There are three main options
1. If your application is not breaking any of the rules outlined above, and you have made sure that all creditors can be paid including HRMC then you can re-submit your application with Companies House and if everything is in order then it should go through this time.
Please do not do this if you have outstanding creditors who cannot be paid. Even if the strike-off slips through, there is now an increasingly likely chance that your company would be reopened again via the courts. This area has become very strict due to the amount of outstanding Bounce Back Loans. There are multiple companies now engaged in maximising recoveries for banks and lenders. Directors who get their company re-opened in this manner will be under the highest scrutiny.
2. If your company only has a small outstanding debt that perhaps you forgot about, then the simplest thing to do is pay off that debt and then resubmit the application to strike-off. If there are no further objections your company will be struck off from the register at Companies House.
3. The third option is to enter a formal liquidation procedure which will allow you to close your company properly. This will typically be a Creditors Voluntary Liquidation (CVL). With a CVL, an Insolvency Practitioner would be appointed, and they would manage all affairs of the company and close it down properly for you. Any assets in the company would be liquidated and funds distributed to the creditors on a standard hierarchical basis. Any debts remaining would be written off as part of the process, including any Bounce Back Loan, provided the loan was clearly used for the purpose it was intended.
There are several advantages to using a Creditors Voluntary Liquidation
- Directors can relax knowing all legal obligations will be met by the IP.
- The process is less expensive and time consuming than other insolvency methods.
- There is more flexibility for creditors.
- Directors have much greater control over the process.
- Directors redundancy claim can often cover all costs and more.
A major benefit of a Creditors Voluntary Liquidation is director redundancy
Dissolving a company may be more appealing than liquidating at first glance, but it can also mean foregoing the ability to claim director redundancy. This form of reimbursement operates similarly to staff redundancy and provides vital support to the director in difficult times.
Many company directors have discovered that while they incur average fees around £3,500 – £5,000 for the liquidation, pursuing this route could lead them towards receiving an additional sum of roughly £9,000 through director redundancy scheme– potentially not only covering financial losses from dissolving their business, but even providing further resources as they look ahead!
The requirements for a directors redundancy claim are that your company has been operating for at least two years and you have been getting a salary through PAYE with a minimum of 16 hours work per week.
Our best advice is, if you are thinking about striking-off your company with a Bounce Back Loan – Don’t! – it doesn’t work and is almost always an automatic rejection now. Furthermore, as mentioned above, if you do slip through the net there are now multiple private companies working with the Insolvency Service to re-open these companies. It is simply not worth it when you can close the company down properly using a formal liquidation process.
Beware of companies offering to Strike-off your company for £1,500
There are now a number of firms advertising online that say they will strike-off your company for £1,500. These companies entice directors in with a quick fix solution and when the strike-off application gets suspended they will then force the director down the Creditors Voluntary Liquidation route anyway. This means they then bill them twice.
Please avoid this. If your company already has outstanding creditors and you are unable to pay then you are insolvent already and should not be considering striking-off your company via a DS01.
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