Temporary suspension of company strike-off and dissolution

Companies House announced on 16 April 2020 that it will temporarily ‘pause’ the strike-off process to prevent companies being dissolved. These measures are in addition to the those already announced, allowing a business to apply for a three-month extension to their accounts filing deadline.

A company may apply to Companies House to be struck off the register and dissolved if it is no longer needed and meets specific eligibility criteria. For companies currently making an application for Voluntary Strike-Off, the proposal will still be registered at Companies House and a notice published in the Gazette in the usual way. However, after this point, any further action will be automatically suspended for the time being, meaning that the company will remain an ‘active’ entity.

A Compulsory Strike-Off procedure also results in a company being removed from the Register of Companies but is when a third party commences the application. This is most often instigated by Companies House itself when a business has failed to file accounts or annual statements.

The announcement is an essential response to the current pandemic because, from the date of dissolution, any assets of a dissolved company will be ‘bona vacantia’. This means that the assets no longer have a legal owner, so technically become the property of the Crown. The company’s bank account will be frozen and any funds held will also be passed to the Crown via the Treasury Solicitor. With the current difficulties being experienced by many business owners, it is easy to see a situation whereby a large number of companies could be dissolved in error leading to a cessation of trading and loss of control of all assets. The measures are therefore designed to give sufficient time to all businesses affected by the outbreak to file documents at Companies House.

When a company is struck off in error, it is possible for a stakeholder to apply for a court order to restore a company. Under certain conditions, a former director or member of the company may apply directly to the Registrar, under a process called ‘administrative restoration’, preventing the need for court involvement. Either way, while a strike-off is capable of being reversed; it can be a time consuming and costly exercise. The recent announcement, therefore, welcomed as a pragmatic response to the current situation.

Additionally, as part of the announcement, Companies House has stated that companies issued with late filing penalties due to reasons relating to COVID-19 will have their appeals treated sympathetically. The government is also set to introduce legislation to ensure those companies required by law to hold physical Annual General Meetings (AGMs) will be able to do so in a safe way, such as by holding them online or allowed to postpone them.

It is worth noting that the temporary changes to the strike-off procedure do not apply to businesses which will be automatically dissolved after a formal insolvency procedure such as Administration or Liquidation.

It is not yet known how long this ‘pause’ on company strike offs will be in place, and it is understood the policy will be kept under review as the broader situation changes.

This post was written by Stuart Morton, a Licensed Insolvency Practitioner at Price Bailey. If you have any questions, please contact your usual Price Bailey point of contact or Stuart using the form below.