A compulsory strike off is a legal proceeding wherein a company’s name and capacity to function as a legal corporate entity is removed from the register of the companies house department of the government.
This, essentially, spells out the end of the companies’ ability to operate in practically any manner, shutting it down and the subsequent liquidation of any of its assets as well as a loss of employment for all members beneath said company.
A compulsory strike off is an occurrence either ordered by the companies house, petitioned by an external party or by an acting agent of the court – of which results in the subsequent shutting down of said company in its entirety, ceasing its operations and preventing it from further legal actions.
What is the Companies House?
The companies house is a government agency which acts as the registrar of any currently operating company entities, wherein it is considered a sub-department of the larger Department for Business, Energy and Industrial Strategy.
In concerns to the motions of a compulsory strike off, the companies house will remove the name of the dissolved company from their registrar, instead placing it on the list of struck off companies that are not allowed to legally operate.
In certain cases, even, the companies house itself may order a company to shut down.
This is mostly seen when a company has either been suspected or found to commit tax fraud, tax avoidance, failure to file their pertinent accounts or a failure to disclose their annual financial statements to the government.
Is Dissolution and Compulsory Strike Off the Same?
The terms dissolution and compulsory strike off refer to the same process of a company being removed from the register of the companies house, being used interchangeably with the status of dissolved being considered the status of the company that has undergone a compulsory strike off.
Can Compulsory Strike Off be Voluntary?
As may be obvious from the compulsory portion of compulsory strike off, a voluntary strike off is distinct from a compulsory strike off in the fact that the director or shareholders of the company have not themselves decided to initiate the dissolution of said company.
A compulsory strike off of a company is usually ordered by the companies house, or petitioned in a court of law by disgruntled creditors in order to force a company into liquidation.
While the actions of the company’s director are limited in the scenario of a compulsory strike off notice, there are several alternative avenues they may take, all of which depend on the scenario and nature of the compulsory strike off and the company itself.
What Happens to a Company’s Assets During a Compulsory Strike Off?
Though dependent on the particular reasonings behind the compulsory strike off notice, the assets of a dissolved company are usually placed in the care and ownership of the government, as the dissolved company is no longer legally able to trade or operate in the capacity of a legally recognized company.
This seizure of company assets is thereby dubbed “bona vacantia” and usually retained by the Treasury Solicitor of the Crown, wherein it may lay unclaimed due to the fact that the dissolved company did not undergo any sort of formal liquidation procedures prior to being struck off.
In order for a company to avoid its assets being placed beneath the care of a governing body and being classified as bona vacantia, it is important for them to perform a liquidation through the proper channels prior to completing the dissolution process.
Why does Compulsory Strike Off Happen?
In some cases, wherein a company receives notice of a compulsory strike off petition, it is likely due to a creditor or other outside party petitioning the companies house (and similar official bodies).
A far more common situation is one wherein the companies house itself has filed the petition to strike off a company due to a failure by the company to file its financial accounts or otherwise disclose pertinent information required by a company entity, all of which may have their deadline extended with a simple request to the companies house itself.
This avoidance of account disclosure is usually intentional and a sign that a company is unwilling to report their financial information for the purposes of unethical or illegal activities.
This may be contested by outside parties not directly involved in the company, especially creditors that have yet to be reimbursed for their products or services by said company beneath the strike off petition.
What are the Company’s Options after a Compulsory Strike Off Notice?
In the event that a company has received notice of a pending compulsory strike off petition, it is possible to contest it, though this particular ability is reserved for the company’s directors, shareholders, and creditors (at least, those that are as of yet unpaid).
This is primarily due to the fact that once a company has been dissolved beneath a compulsory strike off, its assets will be seized by the government and the dissolved company will no longer be able to pay back their debts and liabilities, leaving creditors at a loss.
By extension of this – if the company’s director is unable to contest the compulsory strike off but still wishes to retain ownership of the company’s assets and funds, they must undergo the process of member’s voluntary liquidation or similar methods of asset liquidation and extraction.
It is important to keep in mind that submitting an objection to the compulsory strike off request will not automatically cancel the strike off itself, and will instead only pause or suspend it while the companies house investigates who filed the request, for what purposes, and whether the strike off request is indeed valid and must be fulfilled.
References
- 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)
- 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/)
- 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)
- Companies House logo shared under Open Government Licence v3.0.