Receiving a Gazette notice for compulsory strike-off is naturally very unnerving if it is unexpected. At times like these, when trading is difficult and companies are in decline, it is understandable that deadlines can be missed or reports filed incorrectly. A notice for compulsory strike-off could be the consequence of genuine oversight.
Here we look at what it means if your limited company receives a first Gazette notice, how the process works and how Approved Recovery can help.
What is compulsory strike-off?
Companies House fulfils the role of both registering and dissolving limited companies registered in England & Wales. While dissolving a company is most often a voluntary act by company directors (administrative or company strike off), sometimes it is enforced following an application to strike off a company by Companies House. This application is known as a gazette notice for compulsory strike off.
Compulsory strike-off is the consequence of non-compliance with Companies House regulations, in line with the Companies Act 2006, such as failure to file annual accounts.
Failure to file annual accounts within the stated deadline (9 months after the company’s financial year-end), is one of the most common factors leading to a company being forcibly dissolved. Other reasons include the failure to pay penalties incurred by late submission, or not declaring a new company address. If Companies House is unsuccessful in chasing a company for overdue submissions, they will assume that the business is no longer trading under its registered name and that it is no longer required. They will then begin the process of dissolving the company, starting with a first Gazette notice.
What is a first Gazette notice?
A first Gazette notice is a warning that a company will be struck off the Companies House register, due to non-compliance. If unchallenged, the company will be dissolved, resulting in it being removed from the register and ceasing to exist legally.
The Gazette is a public journal, published each weekday in which statutory notices must be advertised. Only those acting in an official capacity, such as a licensed Insolvency Practitioner, can place a notice. In the context of a compulsory strike-off, the notice is typically placed by a registrar of Companies House.
The notice is issued along with a letter to the company’s registered office address. There is a period of two months during which any interested party can object to the proposed striking off. If no objections are received, the company will be dissolved. At which point it will be forced to stop trading and the company name becomes free for someone else to register.
What does compulsory strike-off mean for my company?
The consequences of a first Gazette notice very much depends on your company’s financial health and your intentions for the future. It may be that you were considering dissolving your business anyway, in which case you could allow the process to continue and your company be struck off the register.
Limited liability means that the company’s debts stay with the company but so do the company’s assets. Upon dissolution, all remaining company assets will vest with the Crown via Bona Vacantia.
Any remaining employees will be made redundant and unable to claim redundancy payments from the Redundancy Payments Service because the company is no longer active. In order for the employees to submit claims to the Redundancy Payments Service, the company would need to be in an insolvency process such as liquidation.
If a company has outstanding tax liabilities, HM Revenue & Customs is likely to object to the strike-off application. If Companies House accepts the objection, the striking off process will be suspended.
If upon receiving a first Gazette notice your company is still trading, it is vital to take quick action. Once the first Gazette notice is advertised, it is likely that the company’s banking facilities will be frozen, making it almost impossible to continue trading.
If a notice of strike-off goes unchallenged, dissolution will still be enforced regardless of the fact you are still trading.
If you continue trading after dissolution, you do so with no legal identity and without the protection of limited liability.
Can I object to a compulsory strike-off?
Fortunately, if you wish to continue trading, the answer is yes and up to two months after the first Gazette notice. The right to object is not limited to directors – any interested party can apply for a suspension, including shareholders and creditors.
If you decide to object as a director, the outstanding documents will need to be filed with Companies House without delay.
If an application for suspension is successful, Companies House will write to the Company to inform you that strike-off action has been discontinued.
Can my company be struck off during the Covid crisis?
In the unpredictable landscape of Covid-19, a concerning number of companies in the UK are reporting a decrease in turnover. Fortunately, the Government has put measures in place to suspend compulsory strike-off to ease the burden on struggling businesses. At the time of writing these measures are still in place and are being reviewed on a monthly basis.
As for voluntary strike-off, this dissolution process was suspended as of March 2020 due to the coronavirus outbreak, but the process is due to be reinstated from 10 September 2020.
How can I apply for voluntary strike-off?
If a company meets the Companies Act 2006 requirements, the directors can apply for the company to be dissolved and struck off the register by submitting form DS01 together with the £10 fee to Companies House.
The directors must comply with the statutory process set out in the Companies Act 2006 and if they fail to do so will be committing an offence.
Where appropriate, the voluntary strike off process is a very cost-effective route to dissolving a company, but there are some exceptions. For example, the company must have ceased trading at least three months prior to the application, and it cannot have changed its name during that time.
If the directors intend to dissolve a company which has net assets in excess of £25,000, then the directors may wish to consider a Members’ Voluntary Liquidation (“MVL”) as an alternative route to dissolution. An MVL is a very efficient and orderly way to wind up a solvent company. There are many advantages to this legal process, such as tax savings and the ability to start proceedings without having to wait three months after trading ceases. A licensed Insolvency Practitioner is appointed by the shareholders to formally wind-up the company’s affairs. The Liquidator realises assets, settles liabilities and distributes surplus capital to shareholders. At the end of the liquidation, the company is dissolved.
Please refer to our service pages for more information about voluntary strike-off versus MVL. If you decide to take this route, our licensed insolvency practitioner will assist you with the entire process and ensure that all company matters are dealt with and closed off.
Help at hand from Approved Recovery
If you are navigating your limited company through difficult times, or if your business has simply served its purpose, Approved Recovery can offer a free initial consultation to discuss the options available and help you determine the best way forward. Contact us for a free consultation on 0800 066 2248 or email firstname.lastname@example.org.