Voluntary dissolution of a company is where the directors apply to Companies House for the company to be dissolved and struck off the register of companies. Company Law Solutions provides a voluntary dissolution service.
Introduction to voluntary dissolution
A company may apply to Companies House to be struck off the register and dissolved if it is no longer needed. Dissolution is not an alternative to formal insolvency proceedings where these are appropriate, and in particular, not if the company is unable to pay its debts. Even if the company is struck off and dissolved, creditors and others could apply for the company to be restored to the register. Note that Companies House also has powers to strike companies off the register if they appear to be no longer needed because they have not registered annual returns or accounts.
The application to have a company struck off the register
An application for voluntary striking off can only be made on the company’s behalf by its directors or a majority of them on form DS01 with the £10 registration fee.
CA 2006, sec1004 and sec1005 set out the circumstances in which the company may not apply to be struck off, in particular, it may not make an application for to be dissolved if, at any time in the last three months, it has:
traded or otherwise carried on business;
changed its name;
conducted any trading
disposed of stock in trade
engaged in any other activity except for the purpose of making an application for strike off or deciding whether to do so or concluding the affairs of the company.
A company cannot apply to be struck off if it is the subject, or proposed subject, of any insolvency proceedings such as liquidation, administration or a compromise or arrangement with creditors or members, but it may apply to be struck off if it has settled trading or business debts in the last three months.
The form must be signed by all the directors or, if there are three or more, a majority of them.
Notifying interested parties
The directors must within 7 days send a copy to the following:
all members (i.e. shareholders in a company limited by shares)
creditors, including all contingent and prospective creditors
Her Majesty’s Revenue and Customs (HMRC) and Department of Work and Pensions (DWP) if there are outstanding, contingent or prospective liabilities
managers or trustees of any employee pension fund and
any directors who have not signed the form.
Once the application is made Companies House will register the information and put it on the company’s public record. The application will be advertised in the London, Edinburgh or Belfast Gazette (as appropriate). In theory, this is to allow interested parties the opportunity to object or complain.
Objections to the company being dissolved
Objections or complaints must be in writing and sent to Companies House with any supporting evidence. Reasons for objecting may include:
if the company has broken any of the conditions of its application for example, it has traded, changed its name or become subject to insolvency proceedings during the three-month period before the application, or afterwards
if the directors have not informed interested parties
if any of the declarations on the form are false
if some form of action is being taken, or is pending, to recover any money owed (such as a winding-up petition or action in a small claims court)
if other legal action is being taken against the company
if the directors have wrongfully traded or committed a tax fraud or some other offence.
A full list of conditions can be found in sec1004 and sec1005.
Dissolution by Companies House and its effects
Unless there is a reason to delay (e.g. because of objections) Companies House will strike the company off the register not less than three months after the date of the notice in the Gazette. The company will be dissolved on publication of a further such notice. From the date of dissolution, any assets of a dissolved company will belong to the Crown as bona vacantia. The company’s bank account will be frozen and any credit balance in the account will pass to the Crown. A company that has been struck off voluntarily by this procedure cannot be restored to the register by the usual administrative process, but only by court order.
Offences and penalties
It is an offence:
to apply when the company is ineligible for striking-off
to provide false or misleading information in, or in support of, an application
not to copy the application to all relevant parties within seven days
not to withdraw the application if the company becomes ineligible.
The offences attract a fine of up to £5,000 on before a magistrates’ court or Sheriff Court or an unlimited fine on indictment. If the directors breach the requirements to give a copy of the application to relevant parties and do so with the intention of concealing the application, they are also potentially liable not only a fine but also up to seven years imprisonment. Anyone convicted of these offences may also be disqualified from being a director for up to 15 years.