If there’s no question that the company is solvent, dissolution offers a cost-effective way to close down. It’s vital to be sure that this is the case, however, as strike-off is only available for solvent businesses. Trying to close an insolvent company in this way will be met with formal objections from creditors.
Creditors’ Voluntary Liquidation is the only safe way to close an insolvent company and offers several key benefits for company directors. The main benefit is being able to comply with their legal duties as directors – failing to do so can lead to severe repercussions, including personal liability.
Conducting the process
Strike-off is the sole responsibility of the director(s) who initiates it, and there’s no official involvement. If you choose to strike off your company you carry out the entire process yourself, including preparing the company beforehand and submitting the DS01 form to Companies House.
Although directors can initiate a CVL, they must appoint a licensed IP to administer it. This is because it’s a formal route to closure that involves the realisation of assets and distributions to creditors.
Some directors may attempt to strike off their company when it’s insolvent, perhaps not realising the implications, or not being fully aware of their business’s financial position. This course of action means they can’t claim director redundancy pay.
Entering voluntary insolvent liquidation enables eligible directors to make a claim for redundancy, which could result in a significant payout. Eligibility is dependent on certain factors, including working under an employment contract for a minimum of two years.
If you’d like more information on the differences between strike-off and company liquidation, or guidance tailored to your own company, please get in touch with one of our team. Company Closure offers free, same-day consultations and can quickly establish your best course of action.