Involuntary Company Strike Off-Potentially Serious Consequences for Company Directors

The striking off of a company from the Register of Companies can be voluntary or involuntary.

company-strike-off
Company strike off can be messy for directors

Elsewhere on this site you can read about the voluntary strike off scheme; in this piece we will take a look at involuntary strike off of a company and how to restore it to the register of companies.

Serious consequences

When a company is struck off the Register of Companies it is dissolved and no longer exists.

This means that

  • Company directors could be held personally liable for debts of the company incurred after strike off;
  • Limited liability protection no longer exists;
  • The company’s property becomes the State’s property.

Involuntary strike off

Involuntary strike off can happen if the Registrar of Companies strikes off for failure to file returns for example; the Revenue Commissioners can also apply to have a company struck off.

If the company has been struck off for less than 12 months then it can apply to the Registrar to have the company restored.

However if the company has been struck off for more than 12 months then an application will have to be made to the High Court to have the company restored to the Register.

This can be a costly exercise.

When making this application by way of Petition you will have to notify

  • The Registrar of Companies
  • The Chief State Solicitor’s Office
  • The Revenue Commissioners
  • The Revenue solicitors
  • The Minister for Finance.

As in the case of the voluntary strike off scheme a restoration application can only be made where all returns are up to date and all penalties and late filing fees paid.

The first step in the application is to obtain a Letter of No Objection from the Companies Registration Office.

Then the application to the High Court will have to be made and if successful the Order of the High Court permitting restoration of the company must be served on the Registrar of Companies within 3 months.

The application to the High Court will be by way of Petition and will involve a grounding affidavit, notice of motion and petition. If successful a further Letter of No Objection will need to be obtained-this time from the Revenue Commissioners.

Conclusion

Company strike off and restoration can be a costly exercise, particularly where an application to the High Court is necessary and all company returns will need to be brought up to date and penalties paid as a starting point.

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Company Strike Off-The Voluntary Strike Off Scheme for Irish Companies

There are two forms of company strike off involving striking the company off the Register of Companies at the Companies Registration Office (CRO)-voluntary and involuntary.

It is important to understand the difference.

Voluntary strike off

Section 311 of the Companies Act 1963 allows the Registrar of Companies to remove companies from the Registrar as part of an administrative voluntary strike off scheme operated by the Companies Registration Office (CRO).

To request a strike off a company director must file a request on a form H15 requesting removal and the power to strike off is a discretionary one.

Voluntary Strike Off Criteria

To avail of the voluntary strike off mechanism a company must

  1. Have ceased trading or never traded
  2. The assets of the company must not exceed €150
  3. The liabilities of the company must not exceed €150
  4. Have filed all annual returns and paid any outstanding penalties up to the date of application for strike off
  5. Obtain a letter of No Objection from the Revenue Commissioners (dated within 6 months of the application)
  6. Advertise it’s intention to be struck off in a national newspaper within 6 weeks prior to the application.

This voluntary strike off procedure, whilst relatively straightforward, is slow and the Registrar of Companies will write to the Company on two separate occasions a month apart to confirm the request for strike off.

The Registrar of Companies must then advertise her intention to strike off the company and a month after this advertisement the company will be struck off and no longer exist.

Consequences of strike off

It is important to note that a company that is struck off, whether voluntarily or involuntarily ceases to exist as a legal entity.

If this occurs then a company which continues to trade could have far reaching and serious consequences for company directors such as-

  • Company property becomes property of the State on dissolution
  • Directors may be held personally liable for company debts as limited liability protection no longer exists
  • Possible application by the Director of Corporate Enforcement to have the directors disqualified or restricted as directors.

Involuntary strike off

Involuntary strike off of companies can occur in number of different scenarios. Involuntary strike off is looked at in greater detail elsewhere on this site.

Shareholders Agreements in Ireland-7 Essential Elements to Focus On

Shareholders agreements are very useful in companies where there is a minority shareholder(s) whose interests and rights can easily be ignored by being outvoted by the other shareholders, particularly in circumstances where the minority shareholder holds less than 25% of the shares.shareholders-agreements-ireland

A minority shareholder in this situation does not have the power to block the passing of a special resolution by the other shareholders who can ignore shareholders with less than 25%.

To counter this situation many shareholders will enter into a shareholders agreement to protect the rights of minority shareholders and this agreement will typically cover a wide range of topics which we look at below.

 

1)      Share subscriptions

When a new investment is made in a company the investor would be well advised to have a shareholders agreement drawn up which will govern how the company is to be run at the time of subscription.

 

2)      Sale of shares

The sale of shares, if there is a dispute between only two shareholders can be problematic but provision for such a turn of events can be provided for in the shareholders’ agreement. This could be done by a number of different procedures called tag along, drag along, offer round, lock in or a combination of these.

 

These type of arrangements are designed to provide a solution where shareholders have fallen out and cannot come to an agreement as to how to resolve it.

 

3)      Company operations

The agreement might also cover the operations of the company such as a right for a minority shareholder to appoint a director to the board of the company or to committees of the Board.

 

4)      Vetoes

One of the most important sections of a shareholders agreement is a vetoes section which lists out a series of transactions which cannot be carried out without the consent of the protected minority shareholder.

 

5)      50/50 shareholders and deadlock

A critical part of any agreement will also deal with a situation where there are two shareholders with each having 50% and no agreement in relation to a substantive course of action.

 

6)      Non-compete covenants

It is common to include a non-compete covenant to prevent shareholders from competing with the company as long as they are shareholders. This would seek to cover competition with the company’s business, solicitation of company’s suppliers and solicitation of company staff.

 

Set out above are some of the most common clauses in a shareholder’s agreement.

 

7)      Other issues

Other issues that might be dealt with include

  • confidentiality,
  • arbitration,
  • no partnership,
  • assignment of rights and
  • conflict with the Articles of Association of the company.

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How to Register a Business Name in Ireland

Are you confused by the difference between a limited company and merely using a business name in your business.

business-names-registration
Register a business name or set up a limited company?

Hopefully this piece will clarify how and why you might register and use a business name.

Elsewhere on the site you can read about the advantages and disadvantages of setting up a limited company.

The registration of a business name is obligatory if any individual or partnership (whether individual or bodies corporate) or any body corporate carries on business under a name other than their own true names.

Specifically it is required if an individual uses a business name which differs in any way from his/her true surname.

It makes no difference whether the individual’s first name or initials are added. So the registration of a business name would be required if, for example, Mr. John Smith traded as “Smith Builders” but not if he traded as “Smith” or “John Smith”).

The registration of a business name would also be required if a firm uses a business name which differs in any way from the true names of all partners who are individuals and the corporate names of all partners which are bodies corporate.

The registration of a business name would also be required if a company uses a business name which differs in any way from its full corporate name; or

a person having a place of business in the State carries on the business of publishing a newspaper.

Registration of a business name requirements

The particulars for registration must be furnished within one month of the date of the adoption of the business name.

The forms of application for registration are:

Form RBN1: for an individual;

Form RBN1A: for a partnership;

Form RBN1B: for a body corporate.

The filing fee is €30.

You should note that registration of a business name

1. does not give protection against duplication of the business name;
2. does not imply that the business name will necessarily prove acceptable subsequently as a company name;
3. does not authorise the use of the business name if its use could be prohibited for other reasons.

It should not for instance be taken as an indication that no rights (e.g. trade marks rights) exist in the name.

The companies registration office does not check proposed business names against names on the registers of companies or business names. It is advisable, therefore, to investigate the possibility of others having rights in the name which it is proposed to use before incurring expenditure on business stationery, etc.

You can check the register of companies and register of business names for free using the companies registration office web search facility.

You can undertake a search of the trademark register at the Patents Office.

Requirements following registration of a business name

Certificate of registration

The registrar issues a certificate of registration for each business name registered. A copy of the certificate of registration must be exhibited in a conspicuous position:

in the case of a firm or individual at the principal place of business and in every branch office or place where business is normally carried on;

in the case of a body corporate, at its registered office in the State and in every branch office or place where business is normally carried on.

Business letters

The name(s) of the proprietor(s) of a business must be shown on all business letters, circulars etc. on which the business name appears.

If the proprietor of the business name is a body corporate the following additional information must be shown on business letters:

1. The full name of the company (note that the only permitted abbreviation is “Ltd” for Limited, “PLC” for Public Limited Company, etc.);
2. The names and any former names of the directors and nationality if not Irish;
3. Additional particulars are required on letters and order forms for Irish registered companies (this does not apply to unlimited companies):
4. The place of registration (e.g. registered in Dublin, Ireland);
5. the registered number (i.e. number of certificate of incorporation);
6. the address of the registered office (where this is already shown on the document, the fact that it is the registered office must be indicated);
7. if the company share capital is mentioned on the business letters and order forms, the reference must be to the paid-up share capital.

Registering changes

When a change occurs in any of the particulars of a registered business name (e.g. change of business name or business address) it should be notified to the registrar within one month of the date of the change.

The forms for notifying changes are as follows:

1. Form RBN2: for an individual;
2. Form RBN2A: for a partnership;
3. Form RBN2B: for a body corporate.

Cessation of business name

When an individual, partnership or body corporate ceases to carry on business under a business name, a Form RBN3 should be filed in the companies registration office within three months after the business has ceased.

A fee does not apply to Form RBN3.

The form should be signed as follows:

Individual: by the individual. In the event of the death of an individual by the personal representative of the deceased;

Partnership: by all persons who were partners of the firm when it ceased to carry on business;

Body corporate: by a director or a liquidator.

Checklist for business name forms

In brief:

The appropriate fee must be lodged;

It is essential that the correct form be submitted at the time of application to register a business name.

The full name of the business must be given on all forms and forms must be dated.

Forms RBN1, RBN1A, RBN1B

The general nature of business must be completed;

The full address of the principal place of business must be stated, a PO box number will not suffice. An address outside the State is not acceptable;

The full date of adoption (i.e. day, month, year) of the business name must be given;

RBN1 : The form must be signed by the individual applying for registration;

RBN1A : The forename name and surname of every individual who is a partner in the firm together with the corporate name of every body corporate which is a partner must be given on the form. The form must be signed by either all the individuals who are partners and by a director or secretary of all bodies corporate which are partners, or by some individual who is a partner, or by a director or secretary of some body corporate which is a partner. In this case the form must be verified by a statutory declaration made by the signatory;

RBN1B : The form must be signed by a director or secretary of the company applying for registration.

Displaying the company name

Every business must paint or affix its business name on the outside of every office or place in which the business is carried on, even if it is a director’s home. The name must be both conspicuous and legible.

In addition, the company must state its business name, in legible lettering, on company letter heads, order forms, invoices, etc

How To Register a Limited Company in Ireland and the Advantages/Disadvantages of Limited Liability

Limited liability? Is your liability really limited?

limited-liability-company

Maybe, maybe not.

This piece will look at how to set up a limited company in Ireland and look at what are the advantages and disadvantages of setting up a company.

Setting Up a Company

To form a company, also known as setting up a company or incorporating a company, you will need to submit the following documents, along with the registration fee, to the companies registration office:

1. Memorandum of association
2. Articles of association
3. Form A1

To carry out your company set up you can download the forms above from the companies registration office website at CRO.ie.

Memorandum of association

Your company set up will involve whats called a memorandum of association. This memorandum of association sets out the conditions upon which the company is granted incorporation. It must contain provisions dealing with certain matters e.g. the name and objects of the company and, if it is a company with limited liability, that fact must also be stated.

The memorandum of association must be in accordance with, or as near as circumstances permit, to the appropriate table in the First Schedule to the Companies Act 1963. It must be printed and divided into paragraphs and numbered consecutively.

Types of company

To set up a company in Ireland you must decide first which is the most appropriate type of company for your enterprise-

1. Private company limited by shares Table B
2. Company limited by guarantee and not having a share capital Table C
3. Company limited by guarantee and having a share capital Table D
4. Unlimited company Table E
5. Public limited company Second Schedule of Companies (Amendment) Act 1983

Articles of association

Your company set up will also require the use of articles of association. The articles of association is a document which sets out the rules under which the company proposes to regulate its affairs.

Articles of association are required to be registered by a company limited by guarantee and having a share capital or an unlimited company. Articles of association must be printed and divided into paragraphs and numbered consecutively.

A company limited by shares or a guarantee company not having a share capital may register articles of association with the CRO. Model form articles of association are set out in the First Schedule to the Companies Act 1963.

Samples of memorandums and articles may be obtained from legal stationers, accountants, solicitors or company formation agent.

Form A1

Form A1 requires you to give details of the company name, its registered office, details of secretary and directors, their consent to acting as such, the subscribers and details of their shares. It incorporates a statutory declaration that the requirements of the Companies Acts have been complied with, and as to the activity which the company is being formed to engage in.

Applications for company set up can be submitted under any one of three schemes, each of which has a different customer service standard:

Ordinary: while there is no guaranteed service level, in practice it takes 15 working days.

Fé Phrainn: ten working days

Companies Registration Office Disk: five working days

Documents are processed in chronological order and are subject to checks. Documents returned for correction are processed according to their date of re-submission to the companies registration office.

Statutory declarations sworn abroad will often require further legalisation.

Conclusion
Company set up in Ireland is a relatively straight forward process. The companies registration office are helpful and they have quite a lot of information on their website.

Sooner or later when forming your small business or even if you choose to work from home, you will have to carry out a company set up. This need not be a complex task but only you can decide at the time whether you need to carry out a company set up……

……..or whether the disadvantages of company set up outweigh the advantages.

Company Registration-the Advantages and Disadvantages of a Limited Company in Ireland

If you are thinking of starting a business in Ireland you may be considering registering a limited company rather than trading as a sole trader or partnership.

 What are the advantages of setting up a limited company?

There are three broad advantages of registering a company with the Companies Registration Office (www.cro.ie).

Advantages of a limited company

Firstly a company has a separate and distinct legal identity from it’s member or shareholders. This allows it to enter into contracts, sue and be sued, and so on in it’s own right.

Secondly a company can live forever provided it is not liquidated or struck off the companies’ register-this is called perpetual succession.

Thirdly it’s potential liability is limited to it’s paid up share capital unless it is an unlimited company but the vast majority of companies in Ireland are private limited companies. In theory this means that you as shareholder or member are protected from creditors and banks should the company cease. In practice however you will find that many banks and suppliers will insist on personal guarantees from directors or shareholders.

Disadvantages of a limited company

The main disadvantage of setting up your own company are

  • Cost, although this is minimal as you can incorporate a company for between €200 and €300
  • Filing financial statements every year with the Companies Registration Office with those details being open to public scrutiny.

On balance, notwithstanding the limitations on the concept of limited liability and protection from creditors, setting up a company is a smart move. The alternatives of trading as a sole trader or partner in a partnership offer no protection from creditors and can leave you open to losing everything you own and bankruptcy.
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