Corporate Law in Bite Size Chunks: Company strike-offs and knowing when to wait
For many private companies in England, a voluntary strike-off offers a streamlined way to dissolve a company that’s no longer needed. But the process is tightly regulated. One of the most misunderstood aspects is what counts as ‘trading’ or ‘carrying on business’.
Under sections 1003 to 1011 of the Companies Act 2006, a company must not have traded or carried on business in the three months prior to applying for strike-off. Breaching this rule is a criminal offence, and in aggravated cases, can even lead to imprisonment.
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Subscribe nowSo, what does ‘trading’ actually mean?
Companies House guidance clarifies that trading includes any activity that generates income or forms part of the company’s normal commercial operations. This includes:
- Selling goods or services
- Issuing invoices
- Entering into contracts
- Receiving payments
However, certain activities are explicitly excluded. These include:
- Settling debts
- Paying for professional advice on the strike-off
- Filing statutory documents
- Selling assets not held for resale (e.g. company vehicles)
To illustrate, selling the company’s delivery van used to transport the Company's product would not be considered trading. But selling the product itself, being part of the company’s commercial activity, would be. The former is a disposal of an asset not held for resale, and is therefore permitted.
What about capital reductions?
Fieldfisher is of the view that a capital reduction and final dividend (or other similar internal matters such as final payments or returns to HMRC) would not be considered as 'trading' and would fall under the exception of being necessary to conclude the company's affairs. You could, in theory, apply for strike-off and then during the three-month wait, conduct a capital reduction to prepare the company for dissolution.
That said, because the law is not definitive on this point, the recommendation is to err on the side of caution. It would be best practice to wait three months from the date of the reduction before applying for strike-off. This ensures compliance and avoids any risk of the application being invalidated.
It’s essential to follow each step carefully; not just to comply with the law, but to avoid unintended consequences like assets passing to the Crown or the company being restored at a later date. If you’re contemplating a strike-off and would like tailored guidance, don’t hesitate to reach out to the Fieldfisher team for expert advice.
