Can I close or strike off a limited company that still has debts?

Deciding to close a limited company is rarely straightforward, particularly when the business still owes money. You may have stopped trading, be struggling to meet payments or simply feel that the company has reached the end of the road.

In these circumstances, directors often ask whether they can apply to have the company struck off. While this may be possible, striking off doesn’t make the company’s debts disappear. Creditors can object to the application, and it may not be the right or safest way to close an insolvent company.

Striking off, also known as dissolution, removes a company from the Companies House register. It’s generally intended for companies that have stopped trading and dealt with their outstanding affairs.

Before applying, directors need to check that the company meets the relevant conditions. For example, it must not have:

• traded or sold stock within the previous three months
• changed its name within the previous three months
• entered formal insolvency proceedings
• reached an agreement with creditors, such as a company voluntary arrangement

Directors must also send a copy of the strike-off application to interested parties, including creditors, within seven days. Failing to follow the rules could lead to a fine or prosecution.

If the company still owes money, a creditor, including HMRC, can object after Companies House publishes an official notice of the proposed strike off. A successful objection will pause the process and give the creditor time to pursue the debt.

Even if the company is dissolved, that may not be the end of the matter. A creditor can usually apply to restore it to the register so recovery action can continue.

When a company can’t pay its debts, directors must put creditors’ interests first. This means protecting company assets, treating creditors fairly and avoiding decisions that could worsen their position.

At Larking Gowen, we help directors understand their options and choose the most appropriate way forward. Depending on the circumstances, a creditors’ voluntary liquidation may be more suitable than strike off.

Need help?

The earlier you ask for advice, the more options you’re likely to have. We’ll take time to understand the position and give you clear, practical guidance on the most appropriate next steps.

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Lee Green | Licensed Insolvency Practitioner | Norwich, Norfolk