Dissolving, also called striking off, a company is an important decision with legal consequences, and it should be taken seriously.

Why directors often choose dissolution

Directors often choose dissolution because it is inexpensive, does not require appointing an insolvency practitioner or solicitor, is procedurally straightforward, and typically completes in a matter of a few months. However, you must be confident the company qualifies and that no one will be disadvantaged, because creditors, employees, other directors and interested parties can object. If anything is mishandled, the company can be restored and your conduct investigated.

If any creditor, employee, bank, or HMRC remains owed money, or if disputes are likely, a Creditors’ Voluntary Liquidation (CVL) is usually the safer route, as an Insolvency Practitioner, like Molly Monks, will manage creditor claims, distributions and statutory reporting.

Eligibility

To be eligible, the company must not have traded or sold stock in the last three months, must not have changed its name during that period, must not be under threat of legal action, and must not have any arrangements in place with creditors such as Time to Pay or a CVA. All directors should be aligned, and all creditors, including employees and HMRC, must be paid in full (with statutory interest where applicable). If these conditions are not met, strike-off is likely to be blocked and a formal insolvency process is more suitable.

Risks and objections

There are real risks to consider. Creditors and other stakeholders can object to strike-off. Creditors can seek restoration of the company for up to six years, and court-ordered restoration can be possible for up to twenty years. If the company is restored, a liquidator may be appointed to review the company’s affairs, investigate directors’ conduct, recover assets and report to the Insolvency Service, potentially leading to personal liability or disqualification. Making a dishonest application is an offence and can result in fines and prosecution.

Preparations before applying

Before applying, settle wages, notice, holiday and any redundancy entitlements for staff, and properly terminate employment where necessary. Notify HMRC that you plan to dissolve and deal with PAYE/NIC closure and any VAT deregistration. Inform all interested parties, creditors, employees, pension trustees or managers, shareholders and any other directors, of your intention to strike off.

Assets, records and bona vacantia

If there are assets, distribute them fairly to shareholders only after all creditors are paid; do not prefer one creditor or shareholder over another. Close bank accounts, domains and online services, and keep the company’s books and records for seven years after dissolution. Be aware that assets left in a dissolved company, including future refunds or HMRC reclaims, pass to the Crown as bona vacantia; recovering them typically requires restoring the company, which is costly and time-consuming. This is one reason some directors prefer a Creditors Voluntary Liquidation, which allows incoming monies to be received into the liquidation and then distributed correctly.

How to apply (Form DS01)

When you are ready, complete Form DS01. A majority of directors must sign. The filing fee is £44, and you must not pay using the company’s own cheque. Within seven days of filing, send a copy of the application to shareholders, creditors, employees, pension scheme trustees or managers and any other directors; failure to notify can lead to fines or prosecution.

After submission

After submission, Companies House will acknowledge receipt and place a first notice in the Gazette. If no objections are received during the two-month period, a second Gazette notice will confirm the strike-off and, from that date, the company ceases to exist. Ensure final statutory accounts and a company tax return are submitted if required. In a liquidation, by contrast, the Insolvency Practitioner  prepares the necessary statements, which is another reason to consider CVL where there are debts, employee issues or complex asset distributions.

‍