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What is a Section 652 Application?

A section 652 application is used to have a company struck off the Companies House Register and dissolved. This is so named as the relevant law is dealt with in the Companies Act 1985, Section 652 and Sections 652A to 652F.

The 652 procedure is not a formal insolvency process. Its purpose is to remove a company that is no longer trading from the Register.

However it can be used if a company is insolvent and has minimal assets which when realised would not meet the costs of a creditors voluntary liquidation, as the minimum cost for a creditors voluntary liquidation is in the region of £4,000. A section 652 application can be done at a lower cost and also demonstrates that the directors knowing the company can not repay their creditors and no longer continue to trade, are taking action to bring the company to an end.

Directors who make a Section 652 Application, must be aware that creditors may object to the strike off and take action to have the company placed into Compulsory Liquidation.

. In order that a company can apply for strike off, Companies House specifies the following:-

"A private company can apply to be struck of it, in the previous three months, it has not:

• traded or otherwise carried on business;

• changed its name;

• for value, disposed of property or rights that, immediately before it ceased to be in business or trade, it held for disposal or gain in the normal course of its business or trade; or

• engaged in any other activity except one necessary or expedient for making a striking-off application, settling the company's affairs or meeting a statutory requirement.

A company cannot apply to be struck off if it is the subject, or proposed subject, of:

• Any insolvency proceedings (such as liquidation, including where a petition has been presented but has not yet been dealt with);

• or a Section 425 scheme (that is a compromise or arrangement between a company and its creditors or members)."

How to apply

Application is made by completing a Form 652a from Companies House which must be signed by sole director if only one, both directors if only two, or a majority of the directors if more than two and returned with a fee of £10.

Within seven days of sending the form to the Registrar, all members, creditors, Crown departments, employees and any directors who have not signed the form should be circulated with full information as to the company assets and liabilities and should copy to them the letter that was sent to the Registrar of Companies.

Creditors should be invited to petition for the winding up of the company as an alternative. In most cases creditors would not wish to take up this option as to do so would involve them in material court cost which they could not substantially recover.

Objections

The Registrar will place an notice in the London Gazette, inviting objections to the proposed strike off. Any interested party may object, but this must be done in writing, with evidence to support the objection.

If no objections are received, three months after the date of the notice, a further notice will be placed in the London Gazette and the company will be removed from the Register.