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Introduction
In this article we will consider a common scenario: You are considering bringing a claim for damages against a company or pursuing a debt they owe you, but when you carry out a search of the register of companies at Companies House you see that the company is soon to be struck off the register, after which it will be dissolved.
Contrary to what you might think, the company may still be worth pursuing.
In this article we consider what dissolution means, why it may still be worth bringing a claim against a company pending strike off and dissolution and how this can be done.
Dissolution of a company
First, we must understand why a company would be struck off the register of companies.
There are two types of strike off– voluntary and compulsory:
- Voluntary: voluntary strike off may occur when a company’s directors decide they no longer have a use for the company, e.g. it is a subsidiary company set up to execute a specific transaction which is now complete, the directors wish to retire and there is no-one to take over the running of the business, or the company has ceased trading.
- Compulsory: compulsory strike off occurs when a third party, usually the Registrar of Companies, petitions for a company to be removed from the register. Reasons for compulsory strike off include the failure of the company to conform with legal requirements, such as failure to file accounts or an annual confirmation statement on time, or if a company has ceased trading and the directors allow it to be struck off.
When a company is dissolved, its assets pass to the Crown. These assets can include property, shares, cash in company bank accounts, rights of action and intellectual property rights.
There could be a multitude of reasons for a company being struck off, but one point to consider, especially if the company is liable to you for damages or a debt, or you are the victim of fraud, is that the strike off may be a deliberate action by the directors to avoid a claim or liability.
Although the Companies Act 2006 (CA 2006) identifies the circumstances in which a company may not apply to be struck off[1],breach of which constitutes a criminal offence, where the strike off is motivated by a desire to avoid liability for fraud, the criminal sanction may be of little concern to the directors. If unchallenged, a strike off may mean the company and its directors will avoid scrutiny and liability.
How to prevent dissolution
Once the process of strike off has been initiated, the Registrar of Companies will publish a notice of the proposed strike off in the London Gazette and on the company’s public record. If there is no reason to delay, which includes when an objection is raised, the Registrar will strike the company off the register not less than 2 months after the date of the notice.
If a company is struck off the register, it no longer legally exists, and you cannot bring a claim against it unless you take steps to achieve the restoration of the name of the company to the register. Therefore, if you are considering bringing a claim against a company that is subject to a strike off procedure, you should act quickly. The sooner you become aware that the striking off procedure has been commenced, the more time you have to prevent the company being struck off and dissolved.[2]
After notice that the company is going to be struck off has been published in the Gazette, you can object to the striking off[3] if you have reason to do so. This will require you to lodge an objection to the Registrar of Companies with supporting evidence of the debt owed to you or details of your legal claim against the company.
If your objection is accepted, the striking off will be put on pause (for a minimum of 6 months, which can be extended), giving you an opportunity to commence action against the company.
Conclusion
As the above highlights, the fact that a company is the subject of a pending strike off and dissolution does not necessarily mean it will not be able to pay a debt owed to you or meet a liability.
It is important to act quickly to object to the strike off, to keep the company on the register and enable you to proceed with a claim.
If a company you have a relationship with has a Notice to Strike Off registered against them at Companies House, whether you have a dispute with them or some other commercial relationship, and you want to explore what you can do protect your interests then please contact Sophie Hay or Marie-Louise King in our Commercial and Regulatory Disputes team.
If a company has already been struck off the register of companies and dissolved, all is not lost. It is possible, in certain circumstances, to achieve the restoration of the name of a company to the register. In the second article in this series, we consider how you can apply for restoration of a company to the register of companies.
[1] Sections 1004 and 1005 Companies Act 2016
[2] N.B. you can set up alerts for companies on Companies House, which may be a useful thing to do if you are considering bringing a claim against a company – this will alert you to any proposed strike off notices.
[3] Section 1000(3) Companies Act 2006
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