Striking off

A properly conducted voluntary striking off, to remove a business from the register at Companies House, can be a straightforward process. But, despite what some advisers might promise, it can leave your company at risk of serious financial issues resurfacing at a later date.

By Ian McCulloch, insolvency director, Begbies Traynor in Preston.

At Begbies Traynor we have worked on many cases involving directors who have come to grief after they were recommended by advisers to opt for a voluntary striking off and dissolution of their business as a way of throwing HMRC and other creditors off their trail.

One such case was that of GP Aviation Group International Ltd, which fell foul of the law when, on the recommendation of a specialist tax adviser, its directors sold the business before having the company struck off the register – and without paying the relevant tax on the sale of assets.

In a lengthy legal case, creditors first had the business restored to the register and placed in liquidation, with the liquidator then reopening the question of the company’s tax affairs several years after the relevant papers were destroyed. The directors were then pursued for more than £1m that had been distributed by them from the company. They argued that it had been done lawfully, but the informal dissolution meant they were unable to prove their innocence.

However ‘creatively’ some advisers may tell you that they can make the arrangements to have your business quietly struck off as a way of avoiding paying creditors, if you follow their advice you could end up on the wrong side of the law, as in the nightmare situation faced by GP Aviation’s directors.

A knowingly fraudulent striking-off application can lead to a £5,000 fine in the magistrates court, or an unlimited fine if the case goes before a jury, along with up to seven years’ imprisonment and a 15-year disqualification from being a director, if you fail to notify the relevant parties about your application.

Formal insolvency, however, allows for the timely and proper conclusion of all aspects of a company’s existence.

It enables directors to confidently move on to future ventures, without risk of issues from the past resurfacing to cause problems. If your business is in financial trouble, an insolvency practitioner is the best first point of contact and will be able to discuss with you the options available. These might include a CVA, for companies that are struggling with debt but are still viable, or alternative solutions such as liquidation. Begbies Traynor are experts in rescuing businesses or, if that’s not possible, in finding the way forward that will provide the best outcome for you and fellow directors.