Why wind up a company?

Why wind up a company?

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I have just rung Companies House about a statutory notice for overdue accounts for a company that is shortly to be wound up. I understand that if we don't do anything the company will simply be removed from the register at no cost and with no penalty. This seems better than charging my client a fee to complete form DS01 etc.

Can anyone please advise if there is a down side to simply leaving Companies House to remove the company, rather than us winding it up, especially assuming ther's no surplus - obviously we will still ahve to tidy things up with HMRC.

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By mark589
23rd Jun 2011 22:44

i've had this situation

i had this situation with a client before. I rang Experian to ask if it would affect the directors credit rating and they told me it would.

Seems this could be a major downside to letting the company be struck off and bearing in mind the fee for voluntary strike off is minimal i believe its worth it

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By mark589
23rd Jun 2011 22:46

i've had this situation

i had this situation with a client before. I rang Experian to ask if it would affect the directors credit rating and they told me it would.

Seems this could be a major downside to letting the company be struck off and bearing in mind the fee for voluntary strike off is minimal i believe its worth it

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Teignmouth
By Paul Scholes
24th Jun 2011 00:52

Chicken & Egg

Once a company is "no more" there's nothing to clear up with HMRC or anyone else, in other words the company can't pay any tax, receive any refund, nor can the directors sign anything as, by definition, they are no longer directors. 

What could happen in theory therefore is that the directors become personally liable for not having properly wound up the affairs of the company.  HMRC or any other potential creditor could say that the directors deliberately let the company go in order to avoid its tax or other obligations, penalties etc.

In the good old days this question would never have arise because HMRC would watch all advertised strike offs and if the company's affairs was not up to date (ESC C16 etc) they would lodge an objection with Companies House thus halting the process and forcing the directors to do things properly.  Unfortunately with the UK being "incorporations unlimited" capital of the world and with HMRC at full stretch, they don't have the resources and so thousands of companies vanish every month without a whimper.

So, yes, with the exception of the potential black mark on the directors' credit records, there is every chance nothing would happen.

My own view however is that just becuse I can get away with breaking the rules doesn't mean it's right to do it, so I always take clients through due process.  As mentioned above, it's cheap and quick (Iris prints off our DS01s ready filled) so why take the chance that the next strike off is when HMRC comes out the woodwork again?

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By lme
24th Jun 2011 08:05

Thank you

Much appreciated, both of you for your clear answers. I'd neglected the technicality of payment from something that doesn't exist.

-- Lydia

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AS
By AS
24th Jun 2011 13:54

How do you stop Companies House from striking off a company?

A client tried to object to Companies House to stop them from striking off a company because my client was owed money by the company. Companies House said that we had to show evidence of legal steps taken in trying to collect the debt in order to stop the striking off. My client was not willing to incur legal fees on a debt that has a low probablity of being collected and therefore the conpany was struck off by Companies House.

In myo pinion Companies House should not be allowed to strike off a company if there is an objection.

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Teignmouth
By Paul Scholes
24th Jun 2011 15:26
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By Monsoon
24th Jun 2011 16:10

This is how

client tried to object to Companies House to stop them from striking off a company because my client was owed money by the company. Companies House said that we had to show evidence of legal steps taken in trying to collect the debt in order to stop the striking off. My client was not willing to incur legal fees on a debt that has a low probablity of being collected and therefore the conpany was struck off by Companies House.

In myo pinion Companies House should not be allowed to strike off a company if there is an objection.

 

Posted by

AS

on Fri, 24/06/2011 - 13:54

Click here to reply

I did this recently - we objected to a proposal to strike off for an ex client who owed fees.

I simply sent CoHo a copy of a recent letter sent to the client entitled "Final reminder - warning of legal action" asking for payment within 7 days or else small claims court. Co Ho wrote back and said they would suspend strike off action for 6 months. Even better, a cheque from the client including the statutory £40 debt collection fee and interest arrived within the week.

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x
By rockallj
27th Jun 2011 11:17

Can a DS01 form be submitted for a company which has liabilities

Confusion arising from the old CA1985 days, as a 652a couldn't be correctly signed by an officer for a company which had existing liabilites? 

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By carnmores
29th Jun 2011 11:07

credit reference agencies - another bunch of crooks

and gold plated at that

they all say check your credit - what they actually want you to do is update their database so they can make more money . bah humbug

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By richardterhorst
29th Jun 2011 11:59

What if no liabilities?

I had a client which was a "holding" company for shares of two subsidiaries which went belly up. From an accounting side the holding company lost as it held debit loan accounts. As the holding company now had large irrecoverable losses but no liabilities the directors ignored the company with result no returns submitted to HMRC or CH. HMRC seemed not to care (No tax ever paid as no taxable income) and CH just raised a then nominal fine followed by advise it would strike off the company which it subsequently did. The director not wanting to dip into their own pockets for fees.

So would directors credit rating be affected in the above scenario with nothing owing other than the fine of £100 never demanded by CH?

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By zarathustra
29th Jun 2011 12:09

Credit reference agencies a red-herring

Knowing how the reports are produced, I dont think a company being dissolved is in any way connected to the dorectors credit file.

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By Monsoon
29th Jun 2011 12:53

DS01 form CAN be submitted for a company which has liabilities

It cannot be submitted if the company is in formal insolvency proceedings.

A copy of the DS01 must be given to every creditor within 7 days of submission. If a creditor arises after the DS01 is submitted, they too are entitled to a copy within 7 days once they have been established as a creditor.

So yes, an insolvent company can apply for voluntary dissolution but it can't do it secretly.

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By User deleted
29th Jun 2011 18:48

Other risks

I am a businessman not an accountant but I can tell you that there is another small risk to letting a company be struck off. Many insurers, including the insurer who provides the majority of our cover, include a question on their proposal form about this. You will find it in the same place where they ask whether directors have any criminal records. Our proposal form includes a question (from memory): 'Have any of the directors been a director of a company which has been placed into administration or liquidation or been struck off by Companies House?'. Something like that. I noticed it because we have a small dormant company and I was thinking of letting it be struck off. When I saw that I decided it would be better to go through the procedure for a members' voluntary liquidation rather than have to explain things every time we change insurers.

Also, anyone doing a cursory internet check on any individual using one of the many websites that offer such a service will find out that a person has been a director of a company that has been struck off. Not good when the nomination for an MBE goes in!

It seems to me that in the modern business world where everything is computerised one would carry this as a "black mark" for a lifetime, even if nobody lost a penny as a result of the striking off.

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By richardterhorst
30th Jun 2011 08:08

Striking off a company - maybe not a good idea

Good point by smallbeancounter

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Teignmouth
By Paul Scholes
30th Jun 2011 08:55

Very small risk

I've been striking off companies since the 80s and no director has ever contacted me about insurance or even credit problems.  Striking off is there for a good purpose, ie to remove a defunct company without the cost and hassle of a formal winding up, so the only people who need fear a black mark are those who do it to avoid more than that (tax or creditors).  In reality there are then so many black marks about whose going to count them?

The problem lies in the ease with which the UK allows people to set up Ltd Cos.

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By I'msorryIhaven'taclue
30th Jun 2011 14:41

Old Skeletons

The "credit blacklisting" for directors can also come about through sites such as "Snoop4Directors", where past directorships are listed. We had a client who had this problem of an old skeleton in the cupboard when the NHS went through their due dilligence process with his new company. Had his previous company been solvent, and so properly wound down, there would have been no blot on his copybook.

I suppose one way of mitigating the damage in the case of an "insolvent" company strike-off might be for all but one of the directors to resign before the Registrar of Companies initiates the strike-off. I'm not wholly certain of the legalitity of that under the new Cos Act.

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