If you are one of the many directors in the unfortunate position of having to close down your company, you may be wondering how you go about it. In general there are there are two ways a company can be dissolved – by strike-off and by liquidation – with strike-off being more straightforward and relatively cheaper.
This blogpost covers the technical aspects of removing your company from the Register of Companies and with the Revenue Commissioners only. There will obviously be other considerations when closing down a business, including HR issues, which are outside the scope of this blog.
Let’s start with strike-off. There are two types of strike-off, involuntary and voluntary.
Involuntary Strike Off
Some directors just leave the company “die a death” that is, they fail to file annual returns and allow the Companies Registration Office (CRO) to strike off the company. The CRO can strike a company off the register if it has failed to file just one annual return. The company will get advance warning of the pending strike off and should it choose to ignore the reminders, the company will be struck off.
This course of action is not recommended as the consequences of this can be severe including:
- Any assets of the company becoming the property of the State
- Loss of the protection of limited liability is lost
- Possible disqualification of directors from acting as directors or having any involvement in the management of any company plus the costs of the Director of Corporate Enforcement in taking such an action.
Even if a company is struck off, creditors can apply to have the company restored and a liquidator appointed through the High Court. See High Court liquidation below.
Voluntary Strike Off
A company that has ceases to trade can apply to the Companies Registration Office to strike off the company provided there are no assets or liabilities in the company. In some cases, it may be necessary for directors to write off any loans owing to them from the company.
To apply for voluntary strike off the company will first need to ensure that all returns have been filed with the CRO and Revenue Commissioners. The directors should then request a letter of no objection from the Revenue Commissioners. On receipt of this letter, an advertisement needs to be placed in one daily newspaper with nationwide circulation and published not more than four weeks prior to the application for strike off. Therefore timing is crucial. (See Form H15 (available on www.cro.ie for details of which newspapers are acceptable.)
The advertisement should be worded as follows:
XY Limited [formerly EFG Limited], trading as Z, [and formerly having traded as W], having ceased to trade/never traded (as applicable) having its registered office at [123 Main St, Cork ] and formerly having its registered office at [100 Main St, Cork] and its principal place of business at [ 200 Main St, Cork], and having no assets or liabilities, has resolved to notify the Registrar of Companies that the company is not carrying on business and to request the Registrar on that basis to exercise his powers pursuant to section 311 of the Companies Act 1963 to strike the name of the company off the register.
By Order of the Board
Name of director/secretary (as applicable)
A director of the company then requests the CRO to strike off the company by sending a completed Form H15 to the CRO together with the letter of no objection from the Revenue Commissioners and the full newspaper page where the advertisement appears.
It can take a few months for the strike off process to be completed and the company will be asked on two separate occasions whether it still wishes to be struck off. The CRO will then advertise its intention to strike off the company in Iris Oifigiuil and a month later the company will be struck off and dissolved.
The company will need to separately deregister for taxes with the Revenue Commissioners by completing Form TRCN1.
See also Members Voluntary liquidation below.
Liquidation
In a liquidation the assets of the company are sold/realised by the liquidator and the proceeds are distributed to the creditors and members in order of priority, as determined by companies legislation.
There are three types of liquidation:
- Creditors voluntary liquidation
- Members voluntary liquidation
- Court liquidation
Creditors Voluntary Liquidation
A creditors voluntary liquidation is normally initiated by the directors of an insolvent company. If a company is insolvent and the directors believe that they are unable to return the company to a solvent position then they need to take professional advice and consider appointing a liquidator.
Insolvency occurs either where a companies debts are greater than its assets or a company is unable to pay its debts as they fall due.
A meeting of creditors is held (for which at least 10 days notice must be given). At this meeting, a brief statement is usually read out by the Chairman of the meeting outlining the reasons for liquidating the company. The creditors (or their appointed proxies) are given the opportunity to ask relevant questions. The liquidator’s appointment is confirmed at the meeting by the creditors who have the power to appoint an alternative liquidator if a majority (in value) of creditors support such an action.
The liquidator will contact creditors asking them to submit their claims against the company. This includes all classes of creditors, including employees and unsecured trade creditors.
Creditors of the company are entitled to join a Committee of Inspection who meet with the liquidator during the course of the liquidation to receive updates and to approve certain courses of action as proposed by the liquidator.
The liquidators will sell/realise the assets of the company and distribute the proceeds to creditors as appropriate. The liquidator will also investigate the collapse of the company and report any matters to the Director of Corporate Enforcement as appropriate.
Members Voluntary Liquidation
A members voluntary liquidation occurs when a solvent company is wound up. A majority of the directors must make a statutory declaration that they believe the company will be able to pay its debts in full within a period not exceeding 12 months from the commencement of the winding up. Within 28 days, the members must then pass a special resolution to wind up the company and appoint a liquidator. The resolution to wind up must be advertised in Iris Oifigiuil (www.irisoifigiuil.ie) within 14 days of passing the resolution.
It is extremely important to complete and file the declaration of solvency correctly. Otherwise, the winding up can become a creditors voluntary winding up.
A members voluntary liquidation can be a tax efficient way for shareholders to restructure organisations or withdraw funds from a company on business cessation because the gain is normally taxed at the Capital Gains Tax rate as opposed to the higher Income Tax rate.
Court Liquidation
A court liquidation is commenced by order of the High Court on foot of a petition. The petitioner is usually a creditor who petitions on the grounds that a company is unable to pay its debts. An Official Liquidator is appointed by the Court with powers to liquidate a company, investigate its activities and pursue errant directors.
The above are the ways in which companies can be dissolved, some of which require the appointment of a liquidator. It can be an enormously stressful time, but the important thing for directors is to deal with the closure of a company as soon as possible. And the first step is usually to contact their accountant, who although they may not act as liquidator, can advise on how to proceed with the winding up.
NEXT STEP:
If you require any further information, please feel free to email me in confidence at noelm@parfreymurphy.ie.
Would the above apply for an entity regulated by the CBI or are there additional considerations?
Its hard to believe how many companies have gone into liquidation in the last two years and still growing! Its awful to see. Thanks for distinguishing between member and creditor voluntary.
What way should i approach ceasing my professional law practice. End of year is september. Current accountant has difficulty with clear explanations
Hi Edward,
Thank you for your comment. I have replied directly to you.
Kind regards,
David
In an involuntary strike off can the directors of the company then become liable for the debts of the company even if the company was a limited company?
Hi Gerard,
The consequences of strike off is as follows:
• The assets of the company become the property of the State on dissolution of the company;
• The company ceases to exist as a legal entity with effect from the date of strike off and dissolution;
• The protection of limited liability is lost with effect from that date, and if the business formerly carried on through the company is continued, the owners are trading in their personal capacity;
• Banks should be unwilling to lend money to an entity which has, effectively, ceased to exist;
• There can also be unpleasant consequences for directors of such companies in that a disqualification order may be made against them by the High Court on the application of the Director of Corporate Enforcement.
Kind regards,
David.
Hi,
Could you tell me the costs involved in a Voluntary Liquidation initiated by the two company directors (myself and my husband) – and what happens if the company has no money to pay costs involved? We owe creditors aprox 10k and bank overdraft of €20k. Are there any repercussions for Directors of a company that has gone into voluntary liquidation in the future?
Many Thanks in advance.
Anna
Hi Anna,
Thank you for your comment.
As the company has number of creditors it is not a straight forward voluntary liquidation. Therefore, I would suggest that you contact us on 021 4310266 to discuss your situation with the relevant partner.
Kind regards,
David.
Hi,
Could you tell me the cost of voluntary strike off for a company that has not beein trading past 5 years and there are no assets or money owned. My old accountant failed to do CRO returns last year, I have now got the returns and will submit to CRO with the fine to bring the accounts up to date.
Best regards
Hi Hal,
I have contacted you directly with regard to your query.
Regards,
David.
Thanks for your article, an informative and easy read indeed.
My situation is that my wife and I run a small home based limited company. Turnover is minuscule, at this stage it doesn’t provide any income and we have debts to a bank of less than 5K. No one else is owed money. Following on from an accident I’ve been kindly granted temporary job seekers allowance just to put food on the table. It just makes no sense for us to maintain a limited company and all I can see happening is that we will start to accumulate real debts. In theory there is enough business to support a part time job for 1 person. What is our easiest and most painless way to either shut everything down and move on with our lives or to shut everything down and maintain the core work as a personal part time job.
Thanks.
Hi Mick,
The most cost effective and efficient way to shut down and dissolve a company is Voluntary Strike Off (VSO). For a company to avail of VSO, it must have no assets or liabilities and all filings with the Revenue Commissioners and Companies Registration Office must be up to date. Once this is the case, a company can apply for a letter of no objection from the Revenue Commissioners.
When the letter of no objection is issued, the company holds an EGM to approve voluntary strike off, then places an advert in a national daily newspaper and submits the application to the Companies Registration Office. The company is then struck from the Register of Companies about 10 weeks after the application is received by the Companies Registration Office.
If the company cannot pay off its debts but wants to be dissolved then liquidation is the process to be completed. Liquidations are costly and time consuming and should really be avoided.
If you would like us to discuss your options in more detail please get in contact with us on 021 4310266.
Kind regards,
David.
Many thanks David. That clarifies things a good bit for us. I’ve bookmarked your site and when we’ve decided what to do can get in touch.
Regards,
Mick
Hi David, Is it absolutely necessary to hold an EGM to complete the strike off process? I understood that the directors make the decision and the shareholders do not even need to be informed? Thanks for your advice,
Melanie
Melanie,
An EGM must be held to pass a Special Resolution.
If you want advice on this please let me know.
Regards,
Seamus
I don’t have enough coming in to keep the company going and don’t even enough to pay the account to submit returns. I know I have to close the limited company down but don’t know where to start. I feel i am in a catch 22 situation. Its a small company no employees only me. Could you advice please.
Hi Martin,
Thank you for your comment.
The best option to close your company down is voluntary liquidation. This will involve getting all company returns up to date with the Companies Registrations Office and also the Revenue Commissioners, before you can start the processes. I would recommend discussing your situation with your accountant and getting an agreed fee in place before you commence the process.
Kind regards,
David.
Hi David
Thanks for reply and good advice but it would be hard to agree a price with my accountant when I don’t even know where the next euro is coming from. Also he is well aware of the position I am in as I owe him money as well. As I said previous catch 22 dammed if I do and dammed if I don’t.
Hi
Thanks for the information. I have a ltd company with two directors and two shareholders all family members in Ireland. The company is not running well since 2007 and slowly we consumed all the cash. Over the past few years we have not paid any money to ourselves and no dividend but company has some assets as second hand equipments of medical use. We had been paying all the creditors including the rent from our own savings to avoid the rent arrears and are creditors from the company. The value of assets(medical equipments) after depreciation is not very high but we want to transfer the assets in our name as company is not trading any more. Before we strike off we want all the assets (medical equipments) to be transferred in both the directors name in lieu of our personal savings transferred for rent etc. How can we do this? At present no other creditors as such. We need to file the final accounts before Set 2013 for the year ending June 2013.
Please advice
Hi Akanksha,
I have emailed you directly regarding your comment.
Kind regards,
David.
Hello,
I have 3 limited Irish companies that never traded or got off the ground. I can’t afford to close them down as to do so I am told costs full page adverts in national newspapers, which I can’t afford being unemployed, and get no benefits either. So, I have to have audited NIL returns every year.
Well, the time is again coming up for the returns. I’ve been in the UK seeking work now for almost a year (no one employs you if you’re close to 60), and I doubt now if I’ll find work and get enough even to get the NIL audits done. My Irish home was sold to get a previous company off the ground. It was a high technology company (artificial intelligence) which I invented, but the investors and customers loved the product so much they went ruthlessly went after me for my shares, stopping my salary, and kicking me out due to my resistance after they got majority ownership (they already wealthy anyway, one was a billionaire, and they both had private jets).
Left with nothing I invented many more ideas, but the crash came and I could not find investors. I left Ireland to the UK to see if I could find work. Because my last employer (the technology company I started) refused to pay PRSI, I was entitled to nothing. Seeing my wife starve to death, I made the decision to try and find work abroad.
I have no address now, except “no-fixed-abode”, I’ve only stayed alive through some friends I have, or soon had, and my main concern now is how to eat from day to day and where to stay, and if I even wish to continue living in this world like this.
Can anyone tell me if there’s a way out of these dormant companies?
Thanks and God Bless.
Paul
I
Hi Paul,
Under the Companies Acts, every company is required to file an Annual Return with the Companies Registration Office (CRO) even if the company is not trading.
I understand the issues you have in relation to the cost involved in having the companies struck off the Register of Companies.
You have three options left if you cannot have the companies struck off voluntarily. They are:
• File the necessary Annual Returns with the CRO
• Do not file the Annual Returns and wait for each company to be struck from the Register of Companies for failing to file Annual Return. This is not something we recommend doing but it is an option for you
• Write to the Registrar of Companies in the CRO explaining your situation and ask him for leniency in relation to filing fees. He has the option to waive filing fees. The relevant address is Damien McDonnell, Companies Registration Office, O’Brien Road, Carlow
I hope the above helps you with your decision to be made.
Kind regards,
Cathy
Hi there,
I have a limited company which is operating successfully for the passed 8 years. I have been declaring a profit in the company each year and paying the relevant CT on it. I expect the company will have a good chunk of cash reserves at some time in the future. What are the options available if I decide to go the route of a Members Voluntary Liquidation when I am 55. What are the restrictions around retirement relief and how do you ensure you (and other directors) qualify.
Thanks in advance
D
Hi D,
Thank you for your query.
To enable us to deal with your query we would require a meeting with you in order to determine the full facts of your case. We would be delighted to meet with you at any time which is convenient to you. Please contact us on 021-4310266 to arrange same.
Kind regards,
Cathy
Hi There,
I am working as Locum doctors and have pvt ltd company, I would had a revenue audit and they disallow some of my expenses and they asked me to pay Vat on the Income which I earned from Locum Doctor as per their statement I should be paying Vat on all income from last three years. so the final bill I have around 90k to pay to revenue and I dont have this amount of money and I am not going to work as locum doctor any more in my company I would like to ask you if I close the company or liqidate the company would I HAVE TO PAY THESE TAXES ? BEFORE OR AFTER CLOSE THE COMPANY?WOULD IT BE DIRECTOR LIABILITY IF I EVEN HAVE LTD COMPANY AND DONT HAVE MONEY IN COMPANY ACCOUNT?
I would appreciate your advise on this regard then I can decide to start process for liquidation of this company.
I let you know that I am also working as a full time doctor on payroll
Razi M
It is likely that if the company is liquidated you will not have any personal liability for this debt as the debt belongs to the company.
Seamus
Hi,
My husband and I are the only directors and shareholders of a limited Irish company which had never commenced trading. We have no liabilities. All returns and accounts have been filed properly. We want to do VSO, but our capital is high (we put some of redundancy money into it about a year ago). Can we (1) pass a special resolution to reduce the share capital back to 100 Euro and (2) do VSO? Or is there a more efficient way of closing the company down?
thanks.
Hi Lana,
Thank you for your query. Please note that a company can request voluntary strike off provided:
• The company has ceased trading or has never commenced trading
• The amount of any assets of the company does not exceed €150
• The amount of any liabilities of the company does not exceed €150
The issued share capital of the company is no longer relevant. From the information that you have provided to us it looks like your company should be able to move forward with the VSO application.
If you would like assistance in completing the VSO application please feel free to contact us.
Kind regards,
Cathy
You do need to be able to communicate effectively and to handle people not only at their
own level but also at more senior levels executive
networking and support programme and this requires a degree of poise and
confidence.
I have a limited company, myself and husband are directors, we are the only employees. The company is currently going through a revenue audit. We are struggling financially the company supplies income for only 1 person, my husband has MS and does not receive any additional income as he is unable to work elsewhere, we have a 3 year old daughter. Upon review of my accounts my accountant has made a dsiclosure to the revenue stating I owe a large sum ~15K. I cannot afford to pay this and even if a repayment plan was put in place I could only afford a small amount every month which they probably won’t accept. I recently got offered a PAYE job and wish to close the company down. If I liquidate the company would this prevent me from have to repay the Revenue the outstanding sum? What is the finacial cost to liquidate?
Thanks for your help,
Jane
Hi,
It is possible that if the company is liquidated as the debt belongs to the company then you will not have any personal liability for this debt.
I would need to see a statement of affairs for the company to determine the potential costs of liquidating it but I would estimate,on the grounds that your accountant does all the preparatory work, fees would be small.
Seamus Parfrey
What happens if the directors if a company sell it and keeps the money?
May,
There are tax issues which you will have to deal with so get professional advice!!!!
Regards,
Seamus
What is the situation with an insolvent limited company which cannot afford to appoint a liquidator? The company has been filing its own returns since the option for small companies became available. There are no assets but considerable debts.
Bill,
Get proper professional advice as soon as you can.
Seamus
Hi,
My wife has a sole director company, online retail, selling wigs. The company has about 1k+ worth of stock, €700 in cash and that’s it. She has never managed to make enough to draw a wage and so wishes to cease and shutdown the company. But has no idea how to do it. As our assets and cash are far above the €150 limit we cannot get a letter of no Objection. Revenue unfortunately are not very helpful with information on what we need to do. Any adbice would be greatly appreciated.
Conor,
I need further information to advise you properly, so give me a call if you want to discuss it. 021 4310266
Regards
Seamus
Hi what happens to a company that has been left with no assets or liabilities after the group was reorganised, can creditors apply for a compulsory winding up ?
Stephanie,
If the company has no liabilities then it has no creditors who can apply for a liquidation.
Regards
Seamus