The Registrar of Companies in Ireland continues to address the level of compliance by Irish registered companies and can take measures to deal with companies who do not comply with their filing obligations, including prosecution of companies or their Directors, or striking companies off the register.
Failure To File Annual Returns Top Reason For Involuntary Strike Off
Involuntary strike off is the process by which the Registrar of Companies has the option, if she so wishes, to strike a company off the Index of Companies under section 12 of the Companies (Amendment) Act 1982, however, this will depend on the circumstances of each Company and the assets an individual company holds. The most common reason for involuntary strike off is failure to file Annual Returns. In 2011 7,938 companies were struck off the register in Ireland for this reason.
Consequences Of Involuntary Strike Off
The consequences of involuntary strike off are very serious for a company that is still trading, and include:
- The assets of the company become the property of the State on dissolution of the company;
- The company ceases to exist as a legal entity with effect from the date of strike off and dissolution;
- The protection of limited liability is lost with effect from the dissolution date. If the company continues to trade after that date, the owners will be trading in their own personal capacity;
- Banks would be unwilling to lend money to an entity which has, effectively, ceased to exist;
- There can also be unpleasant consequences for Directors of such companies. A disqualification order may be made against them by the High Court, on the application of the Director of Corporate Enforcement, which will then disqualify the company Directors from acting as Directors, or having any involvement in the management of any company. The length of the disqualification period is a matter for the Court.
Avoid Strike Off – File Returns On Time
While it is possible to restore companies which have been struck off, this can be a very expensive procedure and a restoration application can only be made where all outstanding Annual Returns are filed and all penalties and late filing fees paid.
Companies wishing to avoid involuntary strike off action should ensure that their Annual Returns are always filed on time.