Disposal of Assets: Demystifying Liquidation and Strike Off

In the ever-evolving landscape of business, a company’s journey is marked by various milestones—expansions, victories, and sometimes, tough choices. One such critical juncture is the disposal of assets, a process that requires careful consideration, strategic planning, and a deep understanding of the available options.

Here in the United Kingdom, the two most prominent methods of asset disposal are Liquidation and Strike off. In this article, we are going to demystify these processes, shed light on their differences, and uncover how we at AccNet can guide you through these challenging waters, with our unique insights.

Understanding Liquidation
Liquidation is a legal process that a company undergoes when it is unable to meet its financial obligations, leading to its closure. It involves the sale of a company’s assets to pay off its debts and liabilities. There are two primary types of liquidation: compulsory liquidation and voluntary liquidation.

Compulsory Liquidation:
This occurs when a company’s creditors, shareholders, or relevant authorities file a petition for the company’s winding up due to insolvency. A court order is obtained, and an Official Receiver or an appointed insolvency practitioner takes control of the company’s assets. The assets are then liquidated, and the proceeds are distributed among the creditors in a specified order.

Voluntary Liquidation:
When a company’s directors and shareholders decide to voluntarily wind up the company due to financial difficulties, it is termed voluntary liquidation. There are two types of voluntary liquidation: members’ voluntary liquidation (MVL) and creditors’ voluntary liquidation (CVL). In MVL, the company is solvent, and its assets are more than its liabilities. In CVL, the company is insolvent, and its assets are liquidated to pay off its debts.

Striking Off: Dissolving a dormant Business, rather gracefully.
Imagine a room that once buzzed with activity—meetings, discussions, and decisions. Now, picture that same room, silent and untouched for months or even years. Businesses, too, can become dormant—inactive, yet still legally registered entities.

In such cases, the process of striking off comes into play. Striking off, also known as dissolution, is a formal way of gracefully closing the doors of a dormant business. Let’s dive deeper into the process of striking off and understand how it helps businesses move forward.

Step 1, of this process is the Dormancy Assessment:
A company can apply to the registrar to be struck off the register and dissolved. The company can do this if it’s no longer needed, for example if:

  • the directors wish to retire and there is no one to take over the running of the company
  • the company is a subsidiary whose name is no longer needed
  • the company was originally set up to exploit an idea that turned out not to be feasible

Some companies which are dormant or no longer trading can choose to apply for strike off. If you have decided that you do not want to retain your company and wish to have it struck off, the registrar will not normally pursue any outstanding late filing penalties unless you restore the company to the register at a later stage.

This procedure is not an alternative to formal insolvency proceedings where these are appropriate. Even if the company is struck off and dissolved, creditors and others could apply for the company to be restored to the register.
More details on this method of asset disposal can be found here:

When you strike-off, there are some benefits, such as:

  • Cost-Efficient closure: Striking off is a cost-effective way to close a dormant company, especially when compared to the formalities and expenses involved in liquidation.
  • Time-saving: The process is relatively straightforward and can be completed in a few months, allowing business owners to move on swiftly.
  • Reputation management: A dissolved company won’t appear on the Companies House register, helping prevent potential misconceptions about the business’s current status.
  • Reduced responsibilities: Once the striking off process is complete, directors’ responsibilities for the company cease.

…And you walk off with a Clean Slate! Striking off offers a fresh start for business owners who may want to explore new ventures without the burden of a dormant entity.

Is there a difference between the 2 methods; liquidation and strike off?
The terms liquidation and strike off are often used interchangeably, but there is a key difference between the two.

Liquidation generally refers to the process of selling off assets in order to pay creditors, while strike off involves permanently closing down a business. In some cases, businesses may choose to pursue both options in order to fully dissolve the company.

In general, liquidation is recommended for businesses that are insolvent or struggling to pay their debts, while strike off may be a better option for businesses that are no longer trading and have no further use for their assets.

So, Strike off or liquidation?
When you’re trying to decide whether to strike off or liquidate your company, you need to consider what would happen to existing debts. If you can’t repay them and try to strike off the company, the application would be challenged. Furthermore, if a creditor files a claim for a debt in the future, the company will be reinstated.
On the other hand, if you liquidate the company, any unpaid debts that remain are officially written off. So there’s no chance of being held personally liable for them in the future. The business is closed down in an orderly manner when you opt for solvent or insolvent liquidation, and you gain the support of a licensed professional.

In the end, it’s up to you to decide which option is best for your company. But you should make sure you understand all the implications of each before making a decision. But, If you are still unsure which route to take either strike off or liquidation for company closure, we can help.
Here at AccNet, we take pride in assisting businesses with sound advice, strategic planning, and meticulous execution during times of asset disposal.

Wondering how exactly we can help you?
Professional guidance: Our team of experienced accountants understands the nuances of the liquidation and strike off processes. We can assess a company’s financial situation and recommend the most suitable route, whether it’s liquidation to address insolvency or strike off for a dormant business.

Legal Compliance: The UK’s legal framework around asset disposal, liquidation, and strike off can be quite complex. We can ensure that all legal requirements are met, documentation is filed correctly, and necessary approvals are obtained, avoiding potential legal pitfalls.

Stakeholder management: In cases of liquidation, managing stakeholders’ interests, including creditors, shareholders, and employees, is crucial. We can assist in transparent communication, helping maintain trust and collaboration during challenging times.

Streamlined Process: Whether a business opts for liquidation or strike off, we can streamline the entire process. This reduces the administrative burden on you as a business owner, allowing you to focus on other aspects of the transition.


So, if your business is at a crossroads of asset disposal, remember that with AccNet, you’re not alone in this journey. Call us on +44 2070973767 or contact us here  so we can guide you forward.

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