Due to the financial difficulties that many businesses are currently experiencing, many directors and shareholders of companies are tempted to simply abandon the company without arranging for the appointment of a liquidator to wind up the company.
Members Voluntary Liquidation
To place a company into a Members Voluntary Liquidation, the directors must follow a Summary Approval Procedure as set out in the 2014 Companies Act. The directors must complete a Declaration. The Declaration summarises the company’s assets and liabilities and the directors state that the company will be able to pay all of its debts in full within 12 months of the commencement of the Liquidation. There may be serious consequences for the directors if they swear a declaration that is inaccurate.
Directors and Shareholders are understandably tempted to simply let the company be wound up due to the expense associated in the winding up process.
Companies Registration Office strike off
Directors and shareholders are often tempted to leave the Companies Registration Office strike off the company for failure to make annual returns. A company may be struck off if it has failed to file an annual return for one year, among other offences.
Under section 726 Companies Act 2014, the Registrar may institute strike off procedures where:
(a) the company has failed to make an annual return as required by section 343;
(b) where the company receives notice in writing from Revenue that the company has failed to deliver a statement (Form 11F CRO) which it is required to deliver under section 882 Taxes Consolidation Act 1997 (Revenue strike off).
(c) the Registrar has reasonable cause to believe that section 137(1) is not being complied with in relation to the company; (no EEA resident director or bond in place)
(d) the company is being wound up and the Registrar has reasonable cause to believe that no liquidator is acting;
(e) the company is being wound up and the Registrar has reasonable cause to believe that the affairs of the company are fully wound up and that the returns required to be made by the liquidator have not been made for a period of 6 consecutive months;
(f) there are no persons recorded in the office of the Registrar as being current directors of the company.
The strike off process is as follows:
- It is the policy of the CRO to issue non-statutory reminder letters to non-compliant companies.
- The strike off process will commence with the issue of the statutory strike-off notice. Only one statutory strike off notice is required to be issued. The notice is sent to the company’s registered office per CRO records. The notice will state the grounds for the strike-off and specify the remedial step that can be taken by the company.
- 28 days after the statutory strike off notice has issued to a company, a notice of impending strike off will be inserted in the CRO Gazette, unless all outstanding returns have been filed in the interim OR the outstanding statement (Form 11F CRO) has been delivered to Revenue as applicable, prior to that date.
- 28 days after that notice has appeared in the CRO Gazette, the company will be struck off the register, unless all outstanding returns have been filed, OR the outstanding statement (Form 11F CRO) has been delivered to Revenue, as applicable, prior to that date.
- After a company, has been struck off the register, a notice dissolving the company will be published in the CRO Gazette.
- If a company has changed address without notifying the CRO, it may be struck off without becoming aware of the fact. It is important therefore, that the registered address of the company filed at the CRO should be correct.
- It should be clearly understood that the liability (if any) of every director, officer and member of the company continues, after the company has been dissolved and may be enforced as if the company had not been dissolved.
It should be noted that where a company has been struck off for failure to file annual returns, application may be made to the High Court by the Director of Corporate Enforcement (the Director) for an order pursuant to section 842(h) Companies Act 2014, disqualifying the company’s directors from acting as director or having any involvement in the management of any company, together with an order for the legal costs incurred by the Director in bringing such application and the costs incurred by him in investigating the matter. The length of the disqualification period is a matter for the Court.
Where a director is engaged in fraudulent activity in relation to the company or its property, that director can be made personally liable without limitation for the debts and liabilities of the company.
The director of a company which has failed to keep proper books of account can be liable to a substantial fine and/or imprisonment for up to five years.
A court can order that a director of the company be personally liable for the debt of that company where proper books of account were not kept.
A director of an abandoned company could face any of these sanctions on foot of an application by a creditor of the company to the court for orders in the terms outlined above. Such an order can be made once the court is satisfied that the company is unable to pay its debts and it appears to the court that the principal reason for the company not being wound up is the insufficiency of its assets.
Voluntary Strike Off
In limited circumstances, there may be an opportunity to apply to the Registrar of Companies for voluntary strike-off from the Register of Companies rather than utilising liquidation procedures. Section 731 of the Companies Act 2014 sets out the conditions for the voluntary strike-off application. A company may apply to the Registrar to be struck off the register if the following conditions are satisfied:
(a) the circumstances relating to the company are such as to give the Registrar reasonable cause to believe that it has never carried on business or has ceased to carry on business;
(b) the company has, within 3 months before the date of the application, by special resolution G1-H15 (special resolution has fee of €15 (paper) or can be completed for free online (at www.cro.ie) –
(i) resolved to apply to the Registrar to be struck off the register on the ground that it has never carried on business or has ceased to carry on business; and
(ii) resolved that pending the determination (or, should it sooner occur, the cancellation, at its request, of this process) of its application to be struck off, the company will not carry on any business or incur any liabilities;
(c) the company has delivered to the Registrar all annual returns required by section 343 that are outstanding in respect of the company as at the date of the application;
(d) the company has delivered to the Registrar a certificate in the Form H15 (filing fee €15) signed by each director certifying that as at the date of the application –
(i) the amount of any assets of the company does not exceed €150;
(ii) the amount of any liabilities of the company (including contingent and prospective liabilities) does not exceed €150; and
(iii) the company is not a party to ongoing or pending litigation;
(e) the Registrar has received from the Revenue Commissioners written confirmation dated not more than 3 months before the date on which the Registrar receives the application that the Revenue Commissioners do not object to the company being struck off the register; and
(f) the company has caused an advertisement, in the prescribed form, of its intention to apply to be struck off the register to be published within 30 days before the date of the application in at least 1 daily newspaper circulating in the State. (Newspapers which can be used for the advertisement of the strike-off request – Irish Independent, Irish Daily Mail, Irish Daily Star, Irish Daily Mirror, Irish Times, Irish Examiner, The Herald, The Sun (Irish edition)