DCA Q&A: HOW CAN WE WIND DOWN OUR COMPANY?
I’ve been in business with four other business partners for roughly six years now. Things had been going well for us – we are suppliers of materials to the construction industry – until last year when our sales took a big drop.
We did everything any business would do to get through a difficult patch – we made cuts to our staff and tightened up on housekeeping where we could. It looked as if we were going to be ok but one of the directors of the company suggested that we delay our returns to the Revenue in an effort to sustain cash flow.
I was completely against the idea but was out-voted after we had discussed it at length. Since then we’ve decide to wind down the company but the other partners still do not want to pay the taxes that are owed given that we won’t be in business any longer. What should we do?
If you fail to file annual returns, the Companies Registration Office can shut down your company in what is known as an Involuntary Strike Off – the CRO has the power to do that if you miss even a single return so you and your business partners are playing with fire.
If you haven’t received a warning of this already, expect it to come soon. When it does arrive, bring it to the intention of all of the directors and make sure they are aware of the consequences of not paying their dues.
If you, as a board of directors, continue to ignore the warnings, the company will be struck off and any assets that you have will become the property of the State. What’s more, you will all lose your entitlement to limited liability – therefore you will no longer be protected and the debts of the company will become yours and your business partners. This is a pertinent point as even if the company is struck off by the CRO, the company’s creditors can take a case to the high court to have the company restored and a liquidator appointed – you will all be held personally responsible for any outstanding debts. Also, if you pursue this course, you may be disqualified from becoming a director of another company in the future.
If you are certain that the company needs to cease operating, then a voluntary strike off is by far the better option for you – at least this way you are in control of the situation. However, you can only apply for this as long as there are no assets or liabilities within the company and when all tax affairs are in order. This may involve the directors loaning the company money to pay up creditors and then writing that debt off.
If you go down this road, you will first need to make sure your CRO and revenue filings are all up to date. You then request a letter of no objection from the Revenue Commissioners. Click here to find out where to send your request and what to write.
Even after this is done, you have to place an advert in a national newspaper with details of your intentions – this must be done up to four weeks prior to the application for strike off. It seems outmoded but, to the CRO, it’s the most effective way to ‘smoke out’ any creditors of the company who might object to a voluntary strike-off.
In this situation, I wouldn’t advise a game of cat and mouse with the CRO – after all, there will only be one winner. You and your business partners, as the losers in the whole affair, could be getting yourselves into more trouble than you know.
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