By Andrew Lambe, 8th August 2013 (updated 17.11.15)
This is a question we are frequently asked by clients – ”Why should I pay to close down my company if I don’t need it? It will be struck off anyway if I do nothing”
This is true, however, Directors are negating their duties and responsibilities under the Companies Acts 2014 by not availing of the option to voluntarily strike their company off the register. As detailed below, there can be serious consequences of burying your head in the sand and doing nothing!
How can I close my company properly?
Once the company has its annual returns up to date, has never traded or has a zero balance sheet, obtains a letter of no objection from the Revenue Commissioners, and places an advertisement notice in a national daily newspaper it can avail of the voluntary strike-off procedure. There are a few forms that need to be completed also. This can be done quite cost effectively – For example, Company Bureau charges €350+VAT for this service including the national daily newspaper notice.
For more on this process and how to avail of same please see our voluntary strike off service
If your company has assets of €50,000 or more, a members voluntary liquidation may be the best and most tax efficient option.
What happens if I do nothing?
If you fail to close your company properly and do nothing after 300 days (this will be reduced to 200 days in 2017) it will be struck off the register by the Companies Registration Office (CRO) for non-filing of annual returns under section 12 of the Companies Act 2014. Once an annual return is more than one year late, the CRO will move to involuntarily strike a company off the register. They will write to the Directors by registered post and at this point, you have approximately 12 weeks to bring the company back into good standing. Companies can also be involuntarily struck off for non-filing of form 11F with the Revenue Commissioners.
What are the consequences if my company is struck-off the register?
As mentioned already, it is your legal duty as a Director to dispose of a company properly and not doing so is a statutory offence. It is possible that you may be subject to a High Court action by the Director of Corporate Enforcement pursuant to section 160(2)(h) Companies Act 1990. Such a statutory offence can result in a fine and/or the Director/s being disqualified to act as a Director or manager of an Irish Company for up to 10 years.
It should also be noted that once a company is dissolved there can be serious repercussions should the company continue to trade. The shareholders no longer have limited liability and any assets the company has automatically become the property of the state.
OK this sounds scary, but how likely is it to happen?
If you are a ‘first time offender’ and the company never traded, an action is unlikely at this moment in time as there are literally thousands of directors who have not closed companies properly going back the last 50 years. It is almost like shooting fish in a barrel. However, they do pick out a few people every year to prosecute. The directors of a company called ‘Cautious Trading Limited’ were picked out and prosecuted. It may have been because of their name – We don’t know! We, however, believe that they are actively pursuing repeat offenders and those directors whereby the company had significant liabilities and did not go down the liquidation route and/or did not engage with creditors including the Revenue Commissioners.
Our advice is to close your company properly – especially if you have been a director of a company previously that has been involuntarily struck off previously. This can be a costly exercise, especially if you need to pay late filing fees to file annual returns in order to be able to wind up the company voluntarily. This can seem pointless, but it you can afford the late filing fees it’s better not to have a skeleton in your closet!
If the company has traded and cannot pay its debts you need to consult a liquidator and engage with your creditors. Examinership is a possibility if the company may be considered a going concern and gives protection to the company from creditors until the company can restructure.
For more information on any of the above points discussed, please don’t hesitate to contact Paula Horan or Andrew Lambe on +353 1 6461625 0r e-mail firstname.lastname@example.org.