Voluntary strike off vs voluntary winding up – a comparative guide

Introduction

This legal guide summarises the key differences between a ‘voluntary strike off’ and a ‘voluntary winding up’ under the Companies (Guernsey) Law, 2008 (Companies Law). Both procedures bring a company’s existence to an end, but they differ in purpose, process, timing, cost and risk. This legal guide is designed to help clients determine the most appropriate route based on their circumstances.

Voluntary strike off

Under the Companies Law, a company can be struck off for one of three reasons: if it is defunct, if it is defaulting, or if the company itself requests a voluntarily strike off. This guide focuses solely on the third scenario, where the company initiates its own removal from the register of companies (Register).

Purpose

A voluntary strike off allows company directors to remove unwanted companies, which have not traded or carried on business for at least three months, from the Register without the need to appoint a liquidator.

This procedure is most suited for dormant or simple companies with no assets or liabilities, providing an efficient way to dissolve entities that are no longer needed. It is commonly chosen by directors confident in the company’s solvency and used by corporate groups to streamline or close legacy or inactive subsidiaries.

Process

An application for voluntary strike off must be made by the company’s board of directors to the Registrar of Companies (Registrar), accompanied by a declaration of compliance signed by a director of the company confirming that all relevant requirements under the Companies Law regarding the application have been met. Applications should be made via the Guernsey Registry’s (Registry) online services portal. There are no associated charges or filing fees for this application.

Copies of the application must be given to every member, employee, creditor and director of the company, as well as the manager or trustee of any employee pension fund within seven days of making the application. Additionally, any new members, employees, or related parties joining after the application must receive a copy within seven days of their association with the company. For supervised companies, a copy must also be provided to the Guernsey Financial Services Commission (Commission) within seven days.

Upon receipt of an application, the Registrar will publish an official notice on the Registry website stating that the company will be struck off and dissolved two months from the date of publication unless cause is shown to the contrary. This notice initiates a two-month objection period during which creditors and other third parties, eg the Guernsey Revenue Service or the Commission, can raise an objection that the company should not be dissolved. If no valid objections are raised, the company will be struck off and will cease to exist as a legal entity. Any remaining property will vest bona vacantia in the Crown, highlighting the necessity for thorough due diligence prior to submission.

Restrictions on application

A company cannot apply for voluntary strike off if, at any time in the three months preceding the date of application, the company has:

• changed its name
• traded or otherwise carried on business
• made a disposal for value of property or rights that, immediately before ceasing to trade or otherwise carry on business, it held for the purpose of disposal for gain in the normal course of trading or otherwise carrying on business, or
• engaged in any other activity that was not necessary or expedient for the purpose of the application for strike off, concluding the affairs of the company, or meeting its legal obligations.

Additionally, an application for voluntary strike off cannot be made if:

• the company is involved in any legal proceedings
• the company has been declared insolvent (‘en désastre‘)
• an interim vesting order had been made against the company’s real property in the Bailiwick of Guernsey
• a special resolution for voluntary winding up has been passed or a liquidator has been appointed other than for the purpose of a solvent amalgamation, restructuring or winding up of the company
• possession or control has been taken of any of the company’s property or affairs by or on behalf of creditors
• an application has been made for a compulsory winding up of the company
• if the company is a protected cell company (PCC), a receivership or administration order as been applied for or is in force in respect of any of its cells, or
• the company has any outstanding liabilities, other than an obligation to return share capital to members on or before its dissolution.

Timing and cost

Voluntary strike off offers a fast, low-cost alternative to voluntary winding up of a company, requiring only a short dormancy period and notice from the Registrar, with no need for a liquidator.

Risk and liability

Strike off has more residual risk compared to voluntary winding up as there is no independent liquidator and officers/members’ liability continue and may be enforced accordingly. There is also potential for reinstatement of the company if creditors later emerge.

Voluntary winding up

Purpose

A voluntary winding up is a formal statutory process directed by a liquidator. This procedure ensures statutory compliance and proper asset distribution without the directors certifying solvency prior to distributions, unlike strike off. It is best used when significant value remains in the company and/or procedural assurance is required.

Process

A company may enter voluntary winding up by passing a special resolution approved by at least 75 per cent of the members eligible to vote. Alternatively, a company may be wound up voluntarily if a period specified in its memorandum or articles of incorporation (M&As) has expired or if a winding up event set out in its M&As has occurred, provided that in either case the company passes an ordinary resolution approved by more than 50 per cent of eligible members.

The resolution approving the voluntary winding up must be filed with the Registry within 30 days of being passed. If the company is supervised, a copy must also be sent to the Commission within the same timeframe.

Once approved, an ordinary resolution is required to appoint a liquidator to realise the company’s assets, pay its liabilities, and distribute any remaining capital among its members according to their respective entitlements. The liquidator’s fees are also fixed at this stage, and all expenses related to liquidation take priority over other claims from the company’s assets.

A voluntary winding up is classified as either solvent or insolvent. If solvent, the board of directors may make a declaration of solvency, which is a declaration signed by a director stating that, in the opinion of the board, the company satisfies the statutory solvency test. To be effective, the declaration must be made within five weeks immediately preceding the date of the resolution for winding up, or on the same date and submitted to the Guernsey Registry within 30 days. This permits the appointment of, among others, a director of the company as liquidator. If no declaration of solvency is made, the liquidator must be independent and a director, among others, would be ineligible to act as such.

Where a declaration of solvency has not been made, or the appointment of a liquidator has been sanctioned by a meeting of creditors or the court, the liquidator is required to call at least one creditors’ meeting within one month of its appointment, unless there are no assets available for distribution to creditors. Notice of the meeting must be sent to all of the company’s creditors at least seven days before the day on which the meeting is to be held, containing notice of the liquidator’s appointment and the process of voluntary winding up.

While a company continues to ‘exist’ as an entity until its dissolution, once it goes into liquidation it must cease to carry on business except in so far as may be expedient for the beneficial winding up of the company. The winding up resolution does not create a moratorium on actions being pursued against the company by its creditors, meaning that creditors may continue to commence or continue proceedings against the company or apply for the company to be compulsorily wound up. Upon the appointment of a liquidator, all powers of the directors cease, unless specifically authorised by the liquidator or by ordinary resolution of the company. Any director acting without authority is guilty of an offence.

There are no specific time limits for the completion of a voluntary liquidation. However, should the process remain ongoing, the liquidator must call a general meeting one year from the date of winding up, with annual general meetings continuing until the company’s affairs have been fully wound up. Each meeting must take place within three months immediately following the expiration of the relevant year. The purpose of these general meetings is for the liquidator to provide an account of its conduct of winding up during the year.

After the company’s affairs have been completely wound up, the liquidator will convene a final meeting to present the closing accounts. Notification of this meeting must be sent to the Registry, after which the Registrar will publish a notice on its website and the company will be dissolved three months following publication of the notice.

Timing and cost

The timeline of a voluntary winding up depends on the complexity of company affairs, such as third-party claims or tax issues, asset disposal, creditor issues and the liquidator’s workflow. The procedure can be prolonged when dealing with intercompany balances, share transfers, or asset disposals. Costs are higher due to liquidator fees and additional statutory requirements.

Risk and liability

This procedure offers protection for creditors and reduced director liability (the assumption of responsibility by an independent liquidator significantly mitigates the risks faced by directors). A voluntary winding up is particularly well-suited for situations that require director protection, creditor sensitivity and strict oversight.

AT A GLANCE – COMPARISON TABLE

Contacts

A full list of contacts specialising in company law can be found here.