If you’ve received a letter informing you of impending compulsory strike off action, this usually means you have not filed your company accounts or have failed to file other required documents at Companies House. There are consequences, often quite significant, if you fail to act promptly, which we detail below..
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What is Compulsory Strike Off?
A compulsory strike off means that a company has been removed from the official register at Companies House and compulsorily closed.
When a company is removed from the Companies House register it is called ‘striking it off’.
Companies House typically start the compulsory strike off process because you haven’t conformed to their legal requirements in some manner, i.e. filing annual accounts.
In these instances, they may send you a letter informing you of an impending compulsory strike off. These letters should be taken seriously.
Reasons a Company can be compulsorily Struck Off
The common reasons for a compulsory strike off notice are that some form of due protocol, expected by Companies House, has not been followed.
The reasons are covered in Section 1000 Companies Act 2006.
The reasons include:
- If they have ‘reason to believe’ you’re no longer in business
- If your company has no appointed directors
- If they’re not receiving any response to their correspondence with you
- If the company is being liquidated but no insolvency practitioner has been appointed
- Not Filing Annual Accounts
- Not Filing Annual Confirmation statement
Have you Received a ‘First Gazette Strike Off Notice’?
For many companies, the first they hear of this term is when receiving a letter announcing that in 3 months the company will be struck off and cease to exist.
The law requires that actions such as this are advertised in the London Gazette, the official journal of public record.
The ‘First Notice’ will be advertised on the Gazette website. Not only does this mean that the information is now in the public realm, and it is not unusual for a company’s creditors or suppliers to see it and be very alarmed, it also a strong warning from Companies House that your affairs are not in order and you need to take action.
What’s the Compulsory Strike Off Process?
Companies House will send you two letters announcing their intention, 14 days part.
If no reply is received to the second letter they will then proceed with the advertisement in the Gazette.
From the advertisement you have a minimum of 2 months until a second advertisement will announce the company is being formally struck off.
You should expect it to take around 4 months from the time you receive the letter from Companies House.
After the final warning letter is published in the Gazette, you will have a 2 month timeframe to save your company.
How to Stop Company Strike Off Action?
Yes, but you will need to bring the paperwork up to date as per the correspondence you’ve received and all will be well.
If you do wish to close the company down (and you have no debts) then you can simply let the process unfold and it will be formally dissolved.
If your company has debts you may think compulsory strike off actually suits you. However, the likely outcome will be that your company is compulsorily struck off but then reinstated once a creditor requests this and a hostile liquidation may be the ultimate outcome.
If you feel the strike off notice has been in error, you can email Companies House:
What are the Consequences of Compulsory Strike Off?
The consequences of strike off are as follows:
- Consequences for Directors – Compulsory strike off could result in directors being disqualified for up to 15 years if it’s found that they failed to act according to the law. Submitting confirmation statements and annual accounts is a legal requirement. To quote Companies House ‘ If you don’t do this, there could be serious consequences.’
- Company Assets – Compulsory strike off could result in assets, (including money in the bank account), becoming Crown Property.
- Personal Liability – Where a company continues to trade despite a compulsory strike off, directors would forfeit the limited liability structure of the company and hence hold themselves personally liable for any incurred debts.
- Damage to Company Reputation – An application for Compulsory strike off, which is publicly advertised in the Gazette, could result in damage to the credibility and credit worthiness of the business.