Company Strike Off, When is The Procedure Appropriate
Posted on 15 June 2015
When a Limited Company is no longer required then as director you are faced with the decision of how to 'get rid' of the company.
So long as the company is SOLVENT then the decision will be between an application to strike the company off the register or for the company to be wound up through a solvent liquidation, known as a Members Voluntary Liquidation (MVL).
the decision as to which way to proceed is largely based on the following pros and cons:
- Initially appears to be low cost
- Director can complete strike off application themselves
- Breach of directors' duties should they fail to notify members, creditors, employees or pension trustee etc
- Director assumes personal liability for any unlawful distribution or strike off
- No protection from future un-quantified claims
- Any funds extracted will be treated as income and taxed accordingly
- Assets not dealt with before strike off pass to the Crown
- All creditors including the crown must be paid in full
Members Voluntary Liquidation
- Capital extracted attracts the lower tax rate of Capital Gains tax (Entrepreneurs Relief may also be available)
- Tax savings usually far exceed cost of liquidation
- Protection from future un-quantified claims
- Peace of mind
- Can take up to 12 months to complete (typically far less than this)
If the company is INSOLVENT or there is any doubt regarding the company's ability to pay all sums due, then the only procedure that should be used is a Creditors Voluntary Liquidation (CVL).
As can be seen from the above, should the company not satisfy the strict criteria required by s1000 of the Companies Act 2006, then strike off must not be used.
Unfortunately we are seeing a growing number of unlicensed 'debt advisors' giving the wrong advice to directors, advising them to go down the strike off route in the mistaken belief that it's the cheaper option or because they don't hold an Insolvency License, they are not able to carry out the liquidation procedure.
Should strike off go wrong, then as director you may incur considerable personal liability and worst case be declared bankruptcy.
If you are unsure on whether or not strike off is appropriate for your company then speak to our Licensed Insolvency Practitioner in our Bristol office.
*Only a Licensed Insolvency Practitioner can offer formal insolvency procedures including that of an MVL.
"Thank you for sorting this out at very short notice - very impressed and I would have no hesitation in recommending your firm".Andrew (Accountant, Keynsham )
Subscribe via RSS
25 April 2016
22 March 2016
20 January 2016
- Head Office: Suite 3 Farleigh House, Farleigh Court, Old Weston Road, Flax Bourton, Bristol, BS48 1UR
- Tel: 01275 464 038
Fax: 01275 462 937