Involuntary Strike-Offs Can Have Consequences

26 Feb 2020 | 01.55 pm

Involuntary Strike-Offs Can Have Consequences

Insight from PJ Lynch of PJ Lynch & Co

26 Feb 2020 | 01.55 pm

There can be serious consequences for allowing the CRO to strike off your company, says PJ Lynch of PJ Lynch & Co

These days as you thumb through the newspapers and when you eventually come to the legal notices you find an ever increasing rate of publications regarding voluntary strike-offs of dormant companies. So have Directors and Beneficial Owners got the message at last? Maybe they have and maybe they haven’t.

The Companies Registration Office (CRO) continues to address the level of statutory compliance and according to CRO records 5,420 companies were involuntary struck off in 2017, 7,619  in 2018 and figures, which have yet to be published by the CRO, show involuntary strike-offs totalling 5,068 in 2019 .

Involuntary strike-off: the implications

Section 343 of the Companies Act 2014 obliges all companies registered in Ireland, active or dormant, are obliged to file an annual return with the CRO, but failing to make a return is the most common reason for involuntary strike-offs in Ireland. 

In some cases, the return dates are simply forgotten, while in other cases many directors, especially where the company has ceased trading or has never traded, simply allow the company to be struck off by the CRO, as they see it as a quick and inexpensive way of disposing of a company. Indeed, failure to make returns is the common reason for involuntary strike-offs in Ireland.

However, this is a very dangerous assumption and could have very serious consequences, as all assets of the company whether fixed, current or tangible, automatically become vested in the state. In addition, when a company is struck off and dissolved it ceases to exist as a legal entity and the protection of limited liability is lost. If the company continues to trade, which I have often found is the case, the directors and beneficial owners are trading in their personal capacity.  

If your company is fully compliant and files its return with the CRO annually, you have absolutely nothing to worry about. However, if you do not, the strike-off procedure will commence with a reminder letter from the CRO to the registered office of the company. 

If the CRO is not in receipt of a response after approximately 28 days they will proceed to institute strike-off procedures under section 726 of the Companies Act 2014 with the publication of a notice of impending strike off in the Iris Oifigiuil.  Around 28 days after the publication of the notice, the company will be struck of the register and automatically dissolved within three months.

The consequences

There can be serious consequences for a company’s principals (directors and beneficial owners) where a company has been struck off for failure to file returns. It may be of little concern to the principals of a company that has ceased trading, but there may be consequences if an application is made by the Office of the Director of Corporate Enforcement (ODCE) to the High Court. 

The High Court may issue a disqualification order pursuant to Section 842 of the Companies Act against any or all of the company’s directors and beneficial owners. Such orders automatically and immediately disqualify the individual from acting as a director or indeed of any officer of any Irish company. The period of the disqualification can up to ten years, but the length of the period is a matter for the court. 

Solutions

What can you do if you discover that your company has been struck off by the CRO? It is possible to reinstate a struck-off company through the CRO, but only within 12 months of strike-off. Simply file all outstanding returns, discharge filing fees and file a H1 application with the CRO. 

Once satisfied with your application, the registrar will restore the company to the register. If a company is struck off for longer than a year, then an application must be made to the High Court — something that can be an expensive and time consuming task and which, furthermore,  may invite investigations into the company’s principals.

Voluntary Strike-Off

If your company has no further function, is dormant, has no assets and no liabilities, it can be disposed of by way of voluntary strike-off pursuant to Section 733 of the Act. This is a fairly simple procedure in which all outstanding returns are filed with CRO and fees discharged. 

The company must also obtain a letter of no objection from the Revenue Commissioners and, before submitting the application to the CRO, must publish a notice in a national newspaper confirming the company’s application for strike off. The registrar will then publish his intension to strike the company of the register and approximately a month later the company will be struck off.  As in the case of involuntary strike-off, it will be struck of and dissolved automatically within three months. 

PJ Lynch (pictured), a licensed Insolvency Practitioner, is principal at PJ Lynch & Company at Westland Square in Dublin 2. Tel (01) 707 9662 or email pj@pjlynchco.ie

Comments are closed.