In the event of a compulsory strike off being served to a company or similar entity by the companies house, certain motions are put into play that not only begin the process of striking off said company from the companies house register, but also notify all parties of such a change.
This is usually considered the first warning, especially in the event that the company is found to be in violation of a particular law or stipulation beneath a governing body – thereby placing the company at risk of legal ramifications, one among which is known as a compulsory strike off.
A first gazette notice for compulsory strike off is generally posted by the companies house, and is meant to state the intent of said companies house to begin striking off a company from their register.
In the case of a compulsory strike off, this is usually due to the company’s violation or failure to fulfill certain duties and responsibilities, though other reasons may exist.
What is the Gazette?
An official journal meant to primarily keep record of any company related processes and procedures that the public may wish to become aware of, the gazette is a publication beneath the government made in more of an official capacity than ordinary newspaper publications.
This acts as both an official proof of notice to any parties that are immediately mentioned in the notice, as well as a method of which external parties related to the company in the notice may become aware of any pending actions to said company.
The gazette is not reserved for a single publication, however, as several forms of the gazette do exist depending on the particular geographical area the proceedings are taking place in as well as the headquarters of the company in question.
What is a Compulsory Strike Off?
The term compulsory strike off refers to the involuntary process of the companies house or similar governing body shutting down the regular operations of a company, liquidating their assets and otherwise dissolving the corporate entity without the input of its directors and shareholders.
This is most often done if the company is found to be in violation of certain laws or duties that it is meant to be upholding, such as a failure to disclose relevant financial information to the companies house or creditors for the purposes of fraud or tax evasion.
Other reasons a company may be served with a compulsory strike off is a failure to pay relevant taxes, penalties, or a failure to disclose other forms of information not only reserved for that of financial matters.
What Happens During a Compulsory Strike Off?
When a company receives notice of a pending compulsory strike off, they will be given a certain period of time in which they may rectify whatever violation has been enacted so as to postpone or cancel the pending compulsory strike off.
However, in the event that the company willfully does not comply or remains ignorant of the pending compulsory strike off proceedings, several procedures will be undertaken by the companies house and related governing bodies that can be quite disruptive to daily business for the company.
The first and most immediately noticeable of these proceedings is the freezing of the company’s banks and a halting of any trades taking place at the time of the compulsory strike off.
This may have the effect of alerting creditors that were not already aware of the compulsory strike off to the situation the company finds itself in, pressing them to seek repayments for any liabilities or loans that said company has yet to fulfill.
In the event that the compulsory strike off has reached fruition and the company has been dissolved and struck off from the companies house register, its assets and funds will become property of the government and as such will not be easily accessible to the owners and shareholders of the now dissolved company.
Apart from the first notice posted in the gazette for the compulsory strike off, several subsequent postings will also be released by the companies house notifying the public of any proceedings and progresses occurring during the company’s striking off, with a final notice signifying that the company no longer exists after the proceedings have been completed.
Why is a Notice Posted in the Gazette?
A first gazette notice posted for compulsory strike off is usually only released by the companies house in the event that the company in question has failed to comply with the repeated requests made to them, or if the companies house has otherwise found evidence that the company is no longer trading or trading in an illegal manner.
This notice is therein posted in the gazette publication for the purposes of notifying any interested parties of the pending strike off that the company may undergo in the event that they continue to ignore the communications of the companies house.
External entities such as investors, customers, creditors or even trading partners may all find that such motions taking place with the company a rather risky endeavor, and as such may change their decisions accordingly.
This can have the unfortunate effect of a company’s reputation being damaged, even if a single notice has been posted in the gazette – potentially affecting their customer base and subsequent revenue.
Can a First Gazette Notice for Compulsory Strike Off be Stopped?
Yes, a first gazette notice for a company’s pending compulsory strike off may be stopped by said company fulfilling the requirements or penalties communicated by the companies house.
Doing so will generally prevent the notice from being published in the gazette in the first place, and will subsequently also cancel the striking off of the company’s name from the companies house register – avoiding dissolution entirely.
Generally, the company to be struck off will have received a letter at their registered address of business detailing what sort of violations said company has committed and how best they may rectify the situation so as to avoid any succeeding consequences.
What Should a Company Do Once They Have Received a Gazette Notice of Compulsory Strike Off?
Generally, the response a company should have once they receive notice of a pending compulsory strike off will depend on the particular wishes of the board of directors as well as that of the shareholders.
This is best made clear through the usage of a vote, wherein the majority winner will decide what to do with the company moving forward.
Allow the Strike Off to Occur
In the event that the majority shareholders and acting board of directors no longer wish to keep their company trading or operational, simply allowing the strike off to occur is a perfectly acceptable course of action, though certain caveats may stall or prevent this process from occurring.
In the event that the company has a disgruntled creditor or similar third party entity that is owed a sum of money or fulfillment of contract terms, they may place an objection to the compulsory strike off with the companies house so as to stall or cancel said strike off, forcing the company to settle its debts prior to dissolution.
Retain the Business and its Operations
If, instead of allowing the company to be dissolved, the shareholders and board of directors wish to continue the function and name of the company, they must make several motions so as to assure the companies house or other enforcing administrative body of their intentions.
The first and most immediate action that must be taken in this particular situation is to open up communication channels with the companies house and to make it quite clear that they wish to cancel the pending compulsory strike off. Future Strategy outlines this as a filing referred to as a strike off suspension application.
Of course, the particular reason behind the compulsory strike off in the first place must also be rectified by the company so as to completely cancel the dissolution instead of simply postponing its enactment.
External Creditor Objects to the Strike Off
A compulsory strike off may be suspended or cancelled by a third party related to the company in the event that they possess an outstanding debt or contract that has yet to be fulfilled by said company to be struck off.
The reasoning behind this is that the company, if struck off, will be both unreachable, legally unable to negotiate or represent itself, as well as unable to access its funds or liquidate its assets, all of which will make it impossible for the creditor to be paid back or remunerated in any manner.
This suspension or cancelling of a pending compulsory strike off is quite similar in process to the directors of a company acting in the same way, with the creditor or other external party needing to make contact with the companies house in order to file the proper motions.
References
- Published by ‘Authority’ (1665) “About The Gazette” The Gazette, Official Public Record Retrieved on February 13 2022, from (https://www.thegazette.co.uk/about_
- Unknown Author. Bona vacantia, Crown disclaimer and escheat: issues in liquidation, dissolution and restoration | Practical Law. Practical Law. Published 2022. Accessed February 13, 2022. (https://uk.practicallaw.thomsonreuters.com/w-007-3468?originationContext=knowHow&transitionType=KnowHowItem&contextData=(sc.Default)&comp=pluk)
- Unknown Author. (N.D.) “Apply to strike off and dissolve a company” United Kingdom Government. Retrieved on 13 February 2022 from (https://find-and-update.company-information.service.gov.uk/close-a-company/)
- The Companies act of 2006 “Dissolution and Restoration to the Register”(2006, modified Feb 16 2021)Retrieved 13 February 2022 from ( https://www.legislation.gov.uk/ukpga/2006/46/part/31#top ) (U.K.) Registrar’s power to strike off defunct company
- Featured image logo shared/modified under Open Government Licence v3.0.