Many companies are in a position where they can no longer continue to trade. If this is where your company is at, this process is not as simple as ceasing to do business.

Company Strike Off

To strike off means to remove a limited company from the register held at Companies House and in doing so, discharges directors from their legal responsibilities of operating a limited company. Once removed from the register, the company if legally dissolved.

Creditors Voluntary Liquidation

This is the legal process of closing a company with outstanding debts.

You man only dissolve your business once all its taxation and creditor liabilities are dealt with.

Key Differences

The main differences between liquidation and strike off applications are:

Dormant or Active?

Strike off applications are only applicable to dormant companies while liquidation can be undertaken for actively trading companies.

Solvent or Insolvent?

Strike off cannot be done on a company with outstanding debts. If you knowingly Strike off a company that has outstanding debts, you can be made personally liable through a compensation order and face removal as a director.

To pursue liquidation, you will need a licensed Insolvency Practitioner. The process is designed to close the company as quickly and efficiently as possible. This is a service we provide.

If you wish to try and clear your company debts so that you can carry out a strike-off application we provide advice on the best way to proceed.

Criteria for Strike-off

To be eligible for a Strike-off application your company must meet a few requirements:

  • Not have carried out any business in the 3 months prior,
  • Not have changed the name in the 3 months prior,
  • Not be subject to insolvency proceeding,s
  • Not be subject to any compromises or agreements with creditors (e.g., section 895 schemes, CVAs, or HP agreements),
  • Not have any legal actions outstanding against the company
  • Have employees and creditors paid out what they are entitled to

Which is more cost-effective?

If your company meets all the criteria set out above, then striking off is the cheaper option of the two.

If your company is in significant debt, then liquidation attracts a larger cost, but can often be paid from funds generated from the liquidation process.

Liquidation requires a licensed Insolvency practitioner at a cost of around £3500 (plus VAT), although this varies based on the amount of work involved in closing the company. It ensures that all company debts are resolved, leaving you free to move on from the business once the process is completed.

Liquidation offers a more complete resolution to the process of closing your company. It is commonly more cost-effective given this more final outcome.

Who Pays For A Company Liquidation?
Liquidation fees can be paid from company assets, from director’s personal funds or sometimes, from redundancy payments. See Who Pays For A Company Liquidation?

If the company’s debts haven’t been resolved and you strike off your company then creditors may resurrect your struck off company to demand payment. If your debts are owed to a government entity like HMRC then any attempt to strike off the company will likely be rejected.

How long does each take?

Liquidation is a longer process than striking off because of the additional administration involved. The process has become less arduous in recent years thanks to a shift into the online space.

This longer timeframe does reflect greater benefits though. The time cost of the process is not significant when outcomes are considered. You can get more information about the duration of the process by contacting us.

How does each affect my responsibilities to my employees?

You cannot strike off your company if you owe outstanding wages to your employees.

If you do so they can resurrect the company and come after you personally for their unpaid earnings.

During Liquidation employees are paid out outstanding wages once secured creditors have been repaid in full. If an employee is unable to be fully compensated, they can be paid a significant portion, if not all their outstanding entitlements through the redundancy payments service.