Can someone collect a debt from a dissolved company?

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Can someone collect a debt from a dissolved company?
Companies must pay off debts before dissolution. (Stockbyte/Stockbyte/Getty Images)

Dissolution of a company under UK law is a very useful tool, commonly used when a company has ceased trading and is dormant. This might be because the directors have retired, the company name is no longer needed or the concept it was set up to sell has fallen flat. Dissolution is a voluntary procedure and completely different from liquidation, where a company is wound up owing money to creditors because it can no longer pay its debts.

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Dissolution

A company can go for the dissolution option if it has not traded for three months, changed its name in the last three months, has no legal proceedings outstanding against it, and has not sold property or rights for money. These rules are absolute and no dissolution is allowed without meeting these criteria. If they are met, complete and send form DS01 to Companies House with a £10 fee. The form must be signed by the company directors, or a majority of directors, and you must send a copy to all interested parties, including employees, HM Revenue and Customs, shareholders and creditors.

Assets and liabilities

A company must dispose of its assets or transfer them before applying for dissolution. Any remaining assets belonging to the company will revert to the Crown as "bona vacantia," which means "ownerless property." Only assets transfer at this point; the liabilities owed by the company are extinguished at dissolution, unless secured on its property, such as a mortgage.

Creditors

Since a dissolved company ceases to exist and cannot owe money, creditors must be informed of a company's intention to dissolve and they must give their permission before it can go ahead. Objectors have three months in which to act. If an objection is received and the dissolution is refused, the company remains active and creditors can pursue debts in the usual way, including starting legal proceedings.

Outstanding debts

If a creditor discovers that a company which owes them money has been dissolved and they were not properly informed of the process, they have six years to begin a fairly simple procedure to have the company restored to the register. The company is then treated as never having been struck off in the first place and the creditor is free to chase payment. Large and numerous debts may force the company into liquidation proceedings. This is an entirely different process that is costly, lengthy and often complicated.

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