Corporate dissolution: voluntary strike off

By | March 3, 2016

The voluntary strike off procedure is a straightforward and cost-effective mechanism which enables a company to have its name struck off the register of companies and then be deemed to be dissolved.

In certain circumstances it can be considered as a low risk, and low cost alternative to voluntary liquidation. The advantage of strike off and dissolution is that it does not incur the significant costs associated with appointing a liquidator. In addition it does not have the risks associated with liquidation, including potential personal liability claims by liquidators against directors, for a contribution to the assets of the company. You should speak to your corporate solicitor to determine which procedure is more appropriate for you.

However, voluntary strike off is generally not appropriate in circumstances where there are outstanding creditors, since they may apply for the company to be restored to the register, and pursue their claim for payment.

The corporate strike off procedure can be used in various situations including where the continued existence of a company serves no real purpose such as:

  • The business and assets of a company have been transferred elsewhere, including pursuant to an acquisition or inter group reorganisation, leaving the company as a dormant shell.
  • The company’s business has been wound up.
  • The company has been set up for a purpose that was not pursued, including a proposed joint venture arrangement, where the partners have subsequently decided not to pursue the venture.

When a company’s name is struck off the register of companies, the company ceases to be a registered company. Once the company is dissolved, it no longer exists as a legal entity. Strike off and dissolution form part of the same overall procedure, and although they generally happen within short timescales of each other, they are different events. The company shall only be deemed to be dissolved once the Registrar of Companies publishes a notice in the gazette that the company’s name has been struck off the register.

Prior to making an application to strike a company’s name off the register, it is important to determine the company’s liabilities. A company has a statutory obligation to notify each of its creditors that it has made an application to be struck off. Therefore it is important to determine the extent of the company’s liabilities, including any contingent liabilities.

It is also important to determine the extent of the company’s assets including tangible and intangible assets, and to ensure that all such assets are transferred from the company prior to the application to strike off. If this does not happen then all property and rights in which the company has a beneficial interest immediately before its dissolution will be deemed to be bona vacantia (ownerless property) and will pass to the Crown when a company is dissolved.

About the Author:

The author, Christian Browne is a corporate solicitor and the Managing Director of Summerfield Browne Solicitors. Summerfield Browne Solicitors have offices in London, Birmingham, Oxford, Cambridge, Northampton and Market Harborough, Leicester. Christian Browne is also a legal advisor with the Institute of Directors in London. 

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