What is a strike off action in progress?

The Australian Securities and Investment Commission (ASIC) can initiate a strike-off action to formally deregister a company from the Australian Business Register (ABR). A ‘strike off action in progress’ notice alerts all involved of the impending winding-up of that company, which will no longer legally exist once concluded. This deregistration may be requested by the company directors/appointed liquidator or instigated by ASIC independently.

What is the strike off action in progress meaning?

Effectively, a ‘strike off action in progress’ notice means the nominated company will be dissolved unless preventative action is taken. ASIC has officially commenced the process of winding up the operation and ceasing its ability to trade. Once concluded, the deregistration will result in the following:

• The company, as a legal entity, no longer exists and cannot further be a party to any new or existing lawsuits.
• Any remaining company property becomes inaccessible to company directors. It is vested either directly into ASIC or the Commonwealth, with ASIC acting as trustee. ASIC, generally speaking, becomes the only party lawfully able to take action pertaining to that property.
• Directors no longer need to provide an update of company details with ASIC and the Australian Business Register (ABR).
• The ceasing of relevant reporting requirements, such as Know Your Customer compliance for the Australian Transactions Reports and Analysis Centre (AUSTRAC).
• Discontinuation of regular payment of the annual company review fee, as well as any other ASIC
• The company has its name and ABN deregistered on the ABR.

Why would ASIC action a strike-off against a business?

There are numerous reasons why a private company might dissolve, often depending on who pulls the trigger. The strike off action can be initiated by either the company directors or ASIC independently – and their justifications are often different.

If the company directors choose to strike off

The ‘strike off action in progress’ may simply be the result of an agreement among directors that it is the most effective pathway to close a company. They might be retiring, or the business may not be treading water adequately. There are ASIC regulations that dictate exactly how this process is to be followed and whether or not a liquidator or administrator needs to be involved.

In order to be eligible for ‘voluntary deregistration’ (avoiding the appointment of a liquidator or administrator) the following criteria must be met:

• “All members of the company agree to deregister
• The company is not conducting business
• The company’s assets are worth less than $1,000
• The company has no outstanding liabilities (e.g. debts)
• The company is not involved in any legal proceedings
• The company has paid all fees and penalties payable to ASIC”

If you satisfy these criteria, Form 6010: ‘Application for voluntary deregistration of a company’ should be lodged with ASIC at least two weeks before the due date of your annual review fee. This can either be done online or through the mail. ASIC recommends “you apply for deregistration online, as this removes any potential delays by mail. You need to create an online account to apply online.”

After submitting your application, you will be invoiced $44 in applicable fees within 14 days, which you must pay within 28 days of the invoicing to continue.

It can take up to two weeks for ASIC to process the voluntary deregistration and publish the ‘strike off action in progress’ notice on its website detailing the application status.

If ASIC independently initiates the strike-off

ASIC reserves the authority to independently initiate a strike off action against any Australian company. This can be brought about by a number of events including the following:

• The non-payment of the company review fee within 12 months of its due date
• No response to a company compliance notice
• No lodgement of company documents over 18 months

What steps are involved in a strike off action in progress in Australia?

If you worry that ASIC may initiate strike off action because you satisfy one of the above criteria, there is still a process that they must follow. This due diligence ensures that all Directors are communicated with and alerted to the commencement of deregistration. If you wish to avoid that scenario following through, there is allotted time to take action and prevent it. The steps followed by ASIC, in chronological order, are:

1. A letter will first be sent from ASIC to all company directors and/or liquidators and administrators to advise of the pending strike off action and consequent deregistration.
2. The company strike off status (SOFF) is then updated on the ASIC register to reflect the ‘strike off action in progress’.
3. The strike off action notice will be accessible on ASIC’s published notices website. This notice officially alerts the public doing an ASIC company lookup that unless steps are taken by directors the deregistration of the company will conclude after two months. To double-check this has been actioned, you can perform a company directors search on the ASIC Published Notices website
4. Should the company directors fail to take the appropriate actions within the two-month period, the strike off action is completed by ASIC and the company henceforth ceases to exist.
   
   

How do I stop a ‘strike-off action’?

The steps that you can take to stop a ‘strike off action’ depend on why the deregistration process commenced in the first place.

If ASIC initiated the strike off action due to your non-payment of the company review fee or other fees, then the subsequent payment of those outstanding amounts may be enough to halt the deregistration. This is assuming that it is received and processed by ASIC in time.

If you initiated the ‘strike off action’ voluntarily and then decide against it, you should communicate this to ASIC as quickly as possible. They will review the request and respond within 28 days. Should you successfully deregister a company voluntarily and then later decide to re-commence trading – reinstating the registration for a dissolved company may be more complex than you assume. ASIC often requires proof of a mistake in the voluntary registration application process or notification by court order to follow through with the reinstatement.

Should you wish to attempt solvent company and ABN reinstatement, you must complete “Form 581 – Application for Reinstatement”, which can take up to four weeks to be assessed by ASIC.

Third parties may also request that a company not be deregistered. This scenario may apply if they are conducting legal proceedings against the company name or intend to conduct legal proceedings against the company shortly.

If you wish to speak to regulators, the ASIC contact number is as follows:

• 1300 300 630: within Australia
• + 61 3 5177 5407: outside Australia

What does a ‘strike off action in progress’ mean for creditors?

A company should only be allowed to dissolve without the appointment of a liquidator or administrator if they are solvent and have no outstanding liabilities. Should you, as a creditor, be owed money by a debtor and discover a strike off action in progress without being contacted by an administrator or liquidator, you must ensure ASIC is aware of this debt as soon as possible, as part of debt collections guidelines for ASIC. The company may be attempting to dissolve without informing regulators of the true state of its balance sheet.

Once a company formally dissolves and is proven to be an insolvent company, it becomes increasingly difficult for creditors to recover any money owed. Therefore, it is imperative that any trading partner communicate diligently with you if they are contemplating deregistration or insolvency proceedings. This communication will allow you time to prioritise the collection of outstanding debts and begin a dialogue with any appointed liquidator or external administrator.

CreditorWatch Solutions

Of course, you can take a lot of the guesswork out of discovering risky entities by leveraging the tools from CreditorWatch. Our sophisticated credit reporting and RiskScore technology will assist your team to better identify partners with deteriorating creditworthiness and elevated probability of default prior to ASIC deregistration notices.

Further, our debtor management platform, DebtorLogic, allows you to upload your entire Aged Trial Balance (ATB) in order to identify those with slipping payment tendencies. The earlier you know, the more prepared you can be – and a business may not always be willing to reveal its troubles openly.

You need not manually monitor all of your debtors either, as our 24/7 monitoring and alerts ensures that any updated information will be emailed to you automatically. You prevent essential information from slipping through the cracks, mitigating the likelihood of getting caught a day late and a dollar short.

For more information on protecting your cash flow from bad debt and risky trading partners, speak to our expert team today.