Companies close for many reasons. The owners may be retiring, the business may have been sold or restructured, a project may have come to an end or the company may simply never have traded. Whatever the reason, a company remains on the register, with all its filing obligations, until it is formally dissolved. There are three main routes to closing an Irish company, and the right one depends largely on whether the company has assets or debts.
Voluntary Strike Off
Voluntary strike off is the simplest and most cost-effective way to close a company that has never traded or has ceased trading and has effectively nothing left. The Registrar of Companies has discretion to strike off a company under section 733 of the Companies Act 2014, provided a number of strict conditions are met:
- The company's assets and liabilities must each be no more than €150. Liabilities cannot be offset against assets, and the company must not be involved in any legal proceedings.
- All outstanding annual returns must be filed and any late filing fees paid.
- The members must pass a special resolution confirming the company has ceased trading or never traded.
- Revenue must confirm in writing that it has no objection, and that letter must be dated within three months of the application.
- A notice of the intended strike off must be published in one of the approved national daily newspapers within 30 days before the application is filed.
Once the application is accepted, the CRO publishes a notice in the CRO Gazette. If no objection is received within 90 days, the company is struck off and dissolved. Any creditor or other interested party can object during that period, and an objection stops the process.
Members' Voluntary Liquidation
A members' voluntary liquidation (MVL) is used to close a solvent company that still has assets, such as cash, property or investments, to distribute to its shareholders. The directors must make a declaration that the company will be able to pay its debts in full within 12 months, as part of the summary approval procedure under the Companies Act 2014. A liquidator is then appointed to realise the assets, settle the liabilities and distribute the surplus to the shareholders before the company is dissolved.
An MVL can also be tax-efficient. Distributions made by a liquidator are generally treated as capital rather than income, which can allow shareholders to benefit from capital gains tax treatment and, where they qualify, revised entrepreneur relief.
Creditors' Voluntary Liquidation
Where a company is insolvent and cannot pay its debts, it is usually wound up through a creditors' voluntary liquidation (CVL). The creditors play a central role, including in confirming the appointment of the liquidator. The liquidator realises the company's assets for the benefit of the creditors and must also report on the conduct of the directors. This can lead to an application to restrict or disqualify directors where the liquidator is not satisfied that they acted honestly and responsibly. A company can also be wound up by order of the High Court, often on the petition of a creditor.
Involuntary Strike Off
Some company owners assume that simply stopping filing annual returns will close the company. In fact, the CRO strikes off companies that fail to file, but this route carries real risks. Any assets remaining in the company, including money in its bank accounts, become the property of the State. Directors can face restrictions on future directorships, and the company may need to be restored at considerable cost if a liability, asset or legal claim later comes to light.
Alternatives to Closing
Not every struggling business needs to close. The Small Company Administrative Rescue Process (SCARP), introduced in 2021, gives viable small and micro companies a way to restructure their debts without the cost of a court-based examinership. Dormant companies can also be kept on the register for future use, provided their annual returns continue to be filed.
Choosing the Right Route
The appropriate route depends on the company's assets, liabilities, tax position and filing history. A company that does not meet the strike off conditions cannot be closed by that route, and a poorly planned closure can leave directors exposed long after the company is gone.
For further guidance and support with closing or striking off your company, contact Setup Your Company at info@setupyourcompany.ie or call us on 01 628 3177.
