What should I do if my company strike off application has been rejected?
If your company strike off application has been objected to, understanding your options at this stage is crucial for determining the best path forward.
Despite your strike off application being rejected, your reasons for wanting to have the company closed down remain. This means that you may now need to consider alternative ways to bring your business to a formal close and have it removed from the Companies House register.
Why would my strike off application be rejected?
Strike off objections typically arise when interested parties, such as creditors you owe money to, are notified of your intention to close the company down. Common reasons for objections include having unpaid debts to creditors, outstanding tax liabilities, unresolved employee claims, or disputes with suppliers or customers.
It is important to realise that strike off is a process designed for solvent companies, or those that have never traded in the first place, to bring about the formal end to an unwanted company in a quick and affordable manner. Strike off is not an appropriate closure method for those companies which are insolvent and have outstanding debts they cannot repay.
When Companies House receives a valid objection from an outstanding creditor, they will suspend the strike off process, giving you time to either resolve the underlying issues – such as repaying those you owe money to – or explore alternative company closure methods.
What are my options if my strike off application is objected to?
When faced with a strike off objection, you have several options to consider:
- Resolve the underlying issue – The most straightforward approach is to address whatever prompted the objection. This might involve paying outstanding debts, settling disputes, or properly consulting with shareholders. Once the objecting party is satisfied, they can withdraw their objection, allowing the strike off to proceed.
- Negotiate with the objecting party – Entering into negotiations with the objecting party can often lead to a resolution even if you cannot afford to pay them the full amount you owe. This might involve negotiating a settlement amount, agreeing to payment terms, or another mutually agreeable solution. Be aware that when your company is knowingly insolvent, you should not prioritise paying one creditor ahead of others. If your company is insolvent and you cannot afford to pay back all the debts you owe, you need to consult with an insolvency practitioner for further advice about how to proceed.
- Challenge the objection – If you believe the objection is invalid – perhaps it relates to money your company does not actually owe – you can respond to Companies House with evidence supporting your position. However, this approach requires careful consideration, as Companies House will typically err on the side of caution when protecting creditor interests.
What are the alternatives to company strike off?
If your application for strike off has been rejected, entering into a formal liquidation procedure may be more appropriate than continuing to attempt to have it struck off:
- Creditors’ Voluntary Liquidation (CVL) – If your company is insolvent and has significant debts that cannot be repaid in full, a Creditors’ Voluntary Liquidation (CVL) allows for an orderly wind-down under the supervision of a licensed insolvency practitioner. This process will allow you to bring an end to an unwanted insolvent company and will ensure that creditors receive fair treatment during the process.
- Members’ Voluntary Liquidation (MVL) – If your company is actually solvent and the strike off objection relates to administrative oversights rather than genuine insolvency, a Members’ Voluntary Liquidation (MVL) might be appropriate. This solvent liquidation process requires directors to make a statutory declaration of solvency, following which they can take advantage of Business Asset Disposal Relief which can provide significant tax advantages for shareholders when distributing company assets.
What happens if I ignore a company strike off objection?
Attempting to ignore a strike off objection can create significant problems for company directors further down the line. If directors are found to have knowingly attempted to strike off a company while being aware of substantial outstanding liabilities, this could be viewed as a breach of directors’ duties. Such conduct might result in director disqualification proceedings or personal liability for company debts.
You should also be aware that should you are able to successfully strike off an insolvent company, Companies House can later reinstate the company if a creditor successfully petitions the court to do so. Directors may then face personal liability for any debts or obligations that should have been addressed prior to closure.
How Scotland Liquidators can help
If you have received an objection from a creditor following a strike off application, you should seek professional advice from a licensed insolvency practitioner. An insolvency practitioner is able to assess your company’s financial position, understand why the strike off application was rejected, and recommend the most appropriate course of action going forward.
At Scotland Liquidators, we have a team of licensed insolvency practitioners working across Scotland, helping directors just like you. Whether you are looking at alternatives to strike off following an objection or are in the early stages of looking at your options when insolvent, we can provide the help and advice you need. Contact a member of the team today.
