Order of priority in the distribution of funds
My company is insolvent and is being wound up. Who will get what money there is?
Since the abolition of Crown Preference part of the money goes to the ordinary creditors as described in the answer to the next question. Subject to this the order of priority is as follows:
The expenses of the liquidation (this includes the liquidator's fees).
Preferential debts (but not interest due after the liquidation).
Debts secured by a qualifying floating charge (but not interest due after liquidation).
Ordinary debts (but not interest due after the liquidation).
Interest on preferential and ordinary debts at the statutory rate.
The contributors (members).
If the members get anything, the company was not actually insolvent.
If a company is insolvent, what part of its money is ring-fenced for ordinary creditors?
The formula for the part of net property to be ring-fenced is as follows:
50 per cent of the first £10,000;
20 per cent of the remainder;
But the total amount ring-fenced cannot exceed £600,000;
And nothing may be ring-fenced if the cost of distribution would be disproportionate.
Which debts rank as preferential?
Preferential debts (which rank equally between themselves) are:
Contributions to occupational pension schemes, etc.
Remuneration, etc of employees - up to a specified limit.
Levies on coal and steel production.
Money owing to third parties in connection with debts, which would have been preferential had they not been paid by the third parties.
Debts to HMRC no longer rank as preferential.
Striking-off. Following application by the directors
We want to end the registration of a dormant company. Is there an alternative to a members' voluntary winding-up?
You could and probably should apply to have the company struck-off, which is a quick, cheap and simple alternative to a members' voluntary winding-up. The company must be dormant and solvent. Details of how it is done are given in the answer to question 493 and possible pitfalls are detailed in the answer to question 494.
What are the steps leading to the voluntary striking-off of a company?
Application to the Registrar using form DS01 must be made by the directors. The form must be accompanied by a payment of £10 which is the only charge. The application may be made by a sole director, both of them if the company has two, or the majority if the company has more than two. Within the previous three months the company must not have traded or otherwise carried on business, or changed its name. Also, it must not be the subject or proposed subject of insolvency proceedings or a compromise or arrangement with members or creditors. The applicant directors must give a copy of form DS01 to every member of the company, employee of the company, creditor of the company, director of the company and any manager or trustee of any pension fund established for the benefit of employees of the company. Any of these people may object to the Registrar.
The Registrar will publish notice of the application in The Gazette. This will invite any person with valid objections to the striking-off to show cause why it should not happen. If no objections are made within three months of publication he may strike the company off. He will put a further notice in The Gazette to say that it has been done.
What are the possible pitfalls of a voluntary striking-off?
Any assets of the company pass to the Crown. You may wish Her Majesty to be the beneficiary but probably you do not, so you should ensure that the company's sole asset is ten pounds in the bank, which will be used to pay the fee for lodging form DS01 with the Registrar. It is permitted to pay a dividend in order to reduce the assets to ten pounds and this does not count as carrying on business in the preceding three months. You will get into difficulties if the company is not solvent so be careful about this. There may also be problems if there are contingent liabilities. These could, for example, include a possible future action for alleged wrongful dismissal by a former employee.
My company has been the subject of a voluntary striking-off. Could it be restored to the register?
A person who should have been notified of the striking-off application may apply within six years to have the company's name restored to the register. Longer is permitted in certain circumstances. The court may order this to be done if it considers that one of the following applies:
The applicant was not given a copy of the application.
The application involved a breach of duty under sections 1004(1) or 1005(1) of the Act.
It is just to do so.