A compulsory strike-off can have profound implications for a company and its directors. Ruairí Cosgrove explains how to avoid it
Involuntary strike-offs are set to begin again in Ireland following a hiatus due to the pandemic. Up to 10,000 companies are at risk of being struck off the register for failure to file their annual returns and financial statements.
In 2020, the Irish Companies Registration Office (CRO) acted to ease the burden on companies struggling under pandemic pressures.
The CRO introduced extended filing deadlines, for example, along with a suspension of involuntary strike-offs for companies that had repeatedly failed to file their annual returns.
This gave companies an opportunity to bring their filing up to date in compliance with the Companies Act 2014. The Registrar has now indicated a return to usual practice.
While your company may have benefitted from the supportive measures put in place by the CRO during the pandemic, it’s crucial to understand that normal service is resuming, or your business may be at risk.
If your company is not fully compliant with the Companies Act 2014 in terms of certain obligations, it could be struck off.
My advice is to review the reasons for strike-offs, listed below, and follow our action plan to make sure your business is either safeguarded or wound up properly.
Grounds for involuntary strike-off
If you want your company to stay in business, make sure you are not breaching any of the relevant rules. The CRO can strike a company off the register for any of the following reasons.
- The company has failed to file an annual return – even if only for one year.
- The company has failed to file Form 11F with Revenue.
- The Registrar has reasonable cause to believe a company doesn’t have an EEA-resident director, a bond in place or a continuous economic link with the State.
- The company is being wound up and the Registrar has reasonable cause to believe no liquidator has been appointed.
- The Registrar has reasonable cause to believe the company’s affairs are fully wound up and the liquidator has not made the required returns for a period of six consecutive months.
- No one is recorded in the CRO as acting as a current director of the company.
Consequences of involuntary strike-off
A company being struck off is not a minor matter and can have prolonged implications for company directors. In fact, when a company is struck off involuntarily, it faces dire consequences.
It ceases to exist. Its protection of limited liability is lost. Its assets become the property of the State.
Directors of a company that has been involuntarily struck off can face disqualification. The Corporate Enforcement Authority can make an application to the High Court issuing an order to disqualify one or all the directors from acting as a director or being involved in the management of a company.
The length of disqualification would be a matter for the court to decide. So what are the steps your company should take now to ensure it is not struck off?
Avoiding involuntary strike-off
If your annual return is late, avoid involuntary strike-off by taking immediate action to bring your annual return and financial statements filings up to date with the CRO. Handle disposals by the book.
If your company has ceased trading, dispose of it through a voluntary strike-off or members’ voluntary liquidation. A director has a legal duty to dispose of a company properly – not doing so is a statutory offence.
Ruairí Cosgrove is a Director at PwC Ireland
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