Alternatives to Liquidation and Declaring a Company Defunct

A company that becomes insolvent has three main alternatives to liquidation (ignoring simply trading through). Â

1) The Company can be declared defunct

2) The Company can go into administration (or an administrative receiver appointed)

3) A voluntary arrangement can be made. Â

This article concentrates on declaring a Company defunct and following articles will look at administration and voluntary arrangements. Â

Declaring a Company defunct is governed by s652-653 CA 1985 (will change to s1000 CA 2006 on 01 Oct 2009) under this the Company ceases to trade. The Registrar of Companies can act on their own initiative to strike off the company and must advertise their intention. For a period of 20 years a member or creditor can apply for the Company to be restored. Despite the Company being declared defunct every director, managing officer and member of the Company continues to be liable as if the Company had not been dissolved (s652(6)(a) and from 01 Oct 2009 a1000(7) CA 2006).

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