What happens to company assets when a company is struck off?
What happens to company assets when a company is struck off?

What happens to company assets when a company is struck off?

Obligations of a Limited company

When you set up a Limited Company, all the directors have legal responsibilities for ensuring the company meets all of it’s obligations.

If key legal obligations are not met, such as; filing your accounts on time, and submitting your confirmation statement, your company could be struck off – but what does that mean for the company and its assets?

Two of the most important obligations a Limited Company has are:-

To submit Financial Accounts to Companies House by the filing deadline. This is usually 9 months after the end of the company year – but you can find the date at Companies House. Companies House do also send you reminders by post.

To submit a Confirmation Statement to Companies House by the filing deadline. This Confirmation Statement simply confirms the basic company information held on the public register at Companies House is correct and is where you can put through any updates to shares etc. This usually falls due on the anniversary of the company incorporation and must be filed within two weeks.

What does it mean to be “struck off”?

If a Limited Company does not meet the above obligations, Companies House can make an application for the company to be “struck-off” – in other words for the company to be dissolved and removed from the register.

Companies House will write to the directors of the Company at the registered office address giving them notice of their intention to strike off the company to give them two months’ notice. If the documents are not filed within this period, the company will be struck off.

What are company Assets?

Company Assets include tangible property such as property or cash and intangible assets like intellectual property, shares and contractual rights.

What happens to the assets of a dissolved company?

Who gets the money first is determined by law. In the case of limited liability companies (that are not publicly traded), the dissolution process usually seeks to pay off the firm’s creditor’s first. The Official Receiver attempts to sell the assets of the company and then uses the funds raised to pay back lenders a proportion of the original amount of money they gave as credit. The authorities may also sell assets to meet any outstanding tax liabilities.

What happens to the assets of a dissolved company?

When a company is struck off, it ceases to be a registered company and no longer exists as a legal entity and is said to be in “bona vacantia”. The Companies Act 2006 set out that any company assets remaining on dissolution, will pass to the Crown.

This includes the company bank balance! At the point the company is struck-off, the bank account is frozen, and the funds pass to the Crown.

If the strike off process has not been voluntary, once a winding-up order is made the Official Receiver or a nominated liquidator will be appointed, the company will cease trading and its assets will be sold so that creditors (those who are owed money by the company) can be paid.

Who gets the money first is determined by law. In the case of limited liability companies (that are not publicly traded), the dissolution process usually seeks to pay off the firm’s creditor’s first. The Official Receiver attempts to sell the assets of the company and then uses the funds raised to pay back lenders a proportion of the original amount of money they gave as credit. The authorities may also sell assets to meet any outstanding tax liabilities.

When an asset transfers to the Crown, it will usually sell it for full market value, whether that be to someone previously connected with the company or on the open market.

Alternatively, the Crown may disclaim an asset (give up its interest in it). Leasehold land, or any onerous property or contract will most often be disclaimed, and anyone affected by this disclaimer will be given notice.

Disclaimers can be complex and what happens to the asset in practical terms will depend on the type of asset being disclaimed.

It may be possible for a company to apply to be restored to the register and, if this is successful, the company comes back to life, bona vacantia ceases to exist and the asset belongs to the company once again.

However, if the Crown sells an asset whilst the company is dissolved then the company will not be able to get the asset back. Instead the Crown will pay back the price it received for the asset, less its costs.

What happens to the shares of a dissolved company?

When a company is struck off before its share capital has been distributed, this is passed to the Bona Vacantia Division of the government legal departments. The Bona Vacantia Division then decides whether it’s worth selling the shares or disclaiming them, as discussed above. It is important to ensure that any assets – including share capital – are dealt with and transferred out of the company’s ownership before it is dissolved.

How to ensure that you are not struck off

If you are a landlord and own property in a Limited Company, you want to ensure that you know the critical dates that you and your accountant should be submitting your accounts and Confirmation Statement to Companies House by the filing deadline.

Make your you keep the director’s contact address up to date so you always receive notices from Companies House and keep in touch with your accountant.

You might want to use a forwarding email address for your companies house contact details so that each email from Companies House is copied to each company director and your accountant so you are kept informed of any critical issues that have been missed.

Finally, keep in touch with your accountant and ensure you provide information to your accountant that accounts and Confirmation statement are up to date.

Have you been struck off and need help?

If your company has been struck off for whatever reason and need help please get in touch via our contact form.

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