Companies warned as informal strike-off rules change

Posted: 17th October 2011

Friday the 14th of October 2011 is a date almost certain to be remembered with sorrow following a poorly-publicised change to the rules governing the informal striking-off of companies.

It has long been the practice that solvent companies which are no longer required could be wound up informally under Extra-statutory Concession C16. Technically, the distribution of any payment to shareholders with regard to their share capital (as opposed to share of retained profits) is an unauthorised distribution and can be claimed by the Crown.

Prior to 14 October, this point was not normally taken by the Treasury Solicitor. Under the old procedure, where the share capital on commencement of the winding-up was £4,000 or more, the share capital could be distributed. Now, that concession has been withdrawn.

In many cases, this will mean companies having to take steps to avoid the creation of an unauthorised redemption of capital. Where the issued share capital is small, the cost of so doing may well exceed the value of the share capital being redeemed.

If you are considering winding-up a company, whether solvent or insolvent, it is important to take advice.