As a creditor, there are two reasons why you should be interested in companies on the strike off list.
The first is that if a company that has applied to strike off owes you money, you need to know about the attempt to dissolve the company so you can object and claim on your debts.
The second reason is that sometimes a company will receive a compulsory strike off notice when it fails to file its accounts with Companies House in time. This is a problem that can point to deeper financial problems.
These issues may require you to take steps to protect your company from the potential of bad debt in the future.
What Is a Company Strike Off?
A company strike off is the process when a business is removed from the Companies House register and it ceases to exist. There are two types of company strike off:
- A voluntary strike off is when a director applies to dissolve the company. This will usually be when they have no more reason to run the company—for example, if they want to retire, or they want to end one company to focus on other projects.
- A compulsory strike off is when another party petitions to have the company struck off the list. This will often be Companies House, which will raise the petition when a business has failed to file accounts or annual statements.
A notice is placed in The Gazette when a company receives a strike off request. This notice is to alert other parties and allow them to contest the dissolution of the company. Other parties have two months to object to the notice. When this period is up, the business will be removed from the register.
What Does It Mean When Your Customer Is on the Strike Off List?
When a strike off is implemented, the company no longer legally exists. It will cease to trade and all its assets, if it has any at the time of dissolution, will be given to the Crown.
The process of dissolving a company is only available to companies that are solvent. Before a strike off, the company should take steps to ensure it has nothing outstanding. This includes completing all the work it has been contracted to do and paying any monies owed.
The business owner should also notify all relevant parties about the strike off, including creditors. However, there are occasions when a company either intentionally or unintentionally applies to strike off without informing all parties.
If this happens, the creditor may only find out about the attempt to close down the company when the strike off is listed. If they miss this notice, they may not realise the company has been dissolved until the process is finished.
Once the company has been dissolved, it may be much harder to recover debts.
What Happens If You Object to a Strike Off?
If a company that owes you money has filed to strike off, you can file to object to the strike off as soon as it happens by contacting Companies House.
It is also possible to object once a company has been removed from Companies House if it owed you money at the point of the strike off and you were not informed about the strike off. In this case, you must be able to prove that the debt exists.
Why Did My Customer Receive a Company Strike Off Notice?
Occasionally, a company with no intention of dissolving will receive a strike off notice from Companies House when it fails to file its accounts by the deadline and it hasn’t organised an extension.
Filing accounts late and ultimately receiving a strike off notice can be a sign of financial difficulties. This is a fairly common occurrence: companies hit with striking off notices in 2019 include publisher Buzzfeed UK and construction firm Hochtief.
If one of your customers has received a strike off notice, it is a good idea to take steps to clarify the company’s position and, if you think there is a chance the company will struggle to pay you, take steps to protect yourself. For example:
- Agreeing more favourable payment terms: either receiving the money up-front or shortening payment time, reducing the amount a company owes you at any one time.
- Including a Retention of Title clause in your contracts will help you repossess any unpaid for goods should a company become insolvent.
- Where appropriate, you can cut your losses and stop doing business with the other company.
Red Flag Alert Protects You From Bad Debt
While the above steps are useful ways to protect your business from a failing customer, they are only effective if you know about the customer’s problems in advance.
When a strike off is happening you need to know about it straight away, because if you leave it and the strike off goes ahead it will be difficult to recover any debts you are owed.
Red Flag Alert helps by showing you the financial health of the businesses you work with, ensuring your customers’ financial issues do not catch you unaware. Red Flag Alert provides the following risk management features:
- Red Flag Alert gives every company in the UK a financial health rating. The rating takes into account 142 data points to provide an accurate estimate of how likely a company is to become insolvent in the next 12 months.
- Red Flag Alert makes it easy for companies to set alerts on their system that notify them as soon as a negative event happens to one of their customers. This could be a strike off, CCJ or a winding up petition.
- Beyond the Red Flag ratings, Red Flag Alert provides in-depth intelligence on the businesses in the database, including detailed financial information.
- Red Flag Alert data is updated in real-time from ten leading sources. Over 180,000 changes are made to our data every day, which covers 6.5 million UK businesses.
If you are worried about the financial health of one of your customers and want to see how Red Flag Alert’s company financial risk assessment tool can help, get in touch with the team or call on 0344 412 6699 to set up a consultation.