Contractors' Questions: Is a company striking-off request bad if I'm unpaid?

Contractor’s Question: I'm unpaid by a company trust that I have set up, and with whom I have a contract. They appear to have closed their website; are not answering the phones and I've heard they are facing a striking-off request. What is this request, and how might it affect me if I'm unpaid by the company? Any guidance to recover my monies would be appreciated.

Expert’s Answer: A striking-off request is a cause for you to be immediately concerned, as once completed a company is ‘struck off’ the register of live companies at Companies House.

‘Once it’s gone, it’s gone’

At this point, it formally ceases to exist in any real sense and while it is theoretically possible to have a company returned to the live index, in practice it is often a case of ‘once it’s gone, it’s gone.’

Companies can be legitimately struck off at the request of their owners, for example if:

  • the company is a subsidiary and no longer needs a separate name;
  • the initial business idea behind the company proved unfeasible;
  • the current directors are retiring and nobody is taking over.

However, voluntary striking-off is usually not suitable for a company with a trading history and generally should not be seen as an easy alternative to formal insolvency proceedings.

Significantly for you, it is entirely possible to object to the voluntary striking-off of a company if you are taking action to recover funds from it.

There is also the possibility that the registrar at Companies House will decide to strike off a company that appears to have ceased trading - and again, if you are owed funds by such a company, you should take action to ensure Companies House are made aware of that fact.

Why its creditors should object to a company’s striking off

You should object because, quite simply, you have a much greater likelihood of recovering the funds you are owed, if the company that owes them to you still officially exists.

There is one positive built into the process, which is that the company directors should notify all creditors of their intention to have the company struck off. ‘All creditors’ includes banks, suppliers and any unpaid employees, along with landlords, tenants, guarantors and even personal injury claimants.

Details of the application will also be published in the London Gazette, so keep an eye on this publication if you believe a company that owes you money is on the verge of being struck off.

How to object to a company being struck off

To object, apply in writing to the registrar, including evidence that the company is still trading - for example, copies of any outstanding invoices they owe to you.

Refer to the Companies Act 2006, sections 1004 and 1005, for an exhaustive list of conditions under which you can object, and ensure any objection you raise is supported by as much printed material and paperwork as possible.

We have seen examples of where companies have paid out what they owe to creditors who object in this way, and the general impression is that they do so simply so that the striking-off action can go ahead before anybody else objects.

But if you feel the application to be struck off is fraudulent in itself, objecting could lead to penalties being applied to the company's owners - 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 if directors did not notify the relevant parties about their application.

While this might not recover your funds if the company has already been struck off, it highlights how seriously this process is treated in the law - and how high the stakes can be for all concerned.

The expert was Adam Home of specialist debt recovery firm Safe Collections.

Editor’s Note: Further ReadingCompanies House FAQs on Striking-Off

Tuesday 29th Oct 2013