There are two principal mechanisms for the dissolution of a solvent Irish company:
- Voluntary Strike-Off (VSO); and
- Members' Voluntary Liquidation (MVL).
To the extent there are other Irish or EU entities in the group, it may also be possible to dissolve the company by way of merger with another group entity.
If you are thinking about dissolving an Irish entity, it is recommended that you discuss your options with your legal, tax and accounting advisors as early soon as possible to determine which option may be best for you.
Dissolving a company either by way of VSO or MVL is relatively straightforward.
Dissolution by VSO is generally the most cost and time efficient option. This process generally works best for companies with limited or no operations and is not typically suitable for companies with material assets and liabilities. This option provides less legal certainty for the future of the dissolved company than an MVL, as a struck-off company can be restored to the Register of Companies for up to 20 years following strike-off. As a result, the directors of a struck-off company may have potential liability as if the company had never been dissolved (albeit that, in reality, this may be more of a theoretical risk than an actual one).
An MVL, by contrast, is a slightly more complex process and therefore tends to be more costly. As part of his duties, the liquidator is responsible for realizing and distributing/settling any assets and liabilities in the company and so this option is generally more suitable than a VSO where a company has material operations. Depending on the profile of the company in question, the process of a liquidator working his way through the assets and liabilities of a company may be quite involved and an MVL can take up to a year (or longer in certain cases) to complete (albeit that the powers of the directors' effectively cease once the liquidator has been appointed). Unlike a company that has been struck-off by VSO, a company cannot normally
be restored to the Register of Companies following dissolution by MVL and so this option provides greater legal certainty to the directors of a company that is being dissolved.
The following are pre-conditions to completing a VSO:
a. The company must have ceased trading;
b. The company's annual return filings must be up-to-date;
c. The company's tax return filings must be up-to-date;
d. The company must not be a party to ongoing or pending litigation; and
e. The company must not have assets or liabilities above 150.
Depending on the nature of the company's business or activities, or the level of assets or liabilities on its balance sheet, getting below the 150 threshold often requires extensive preparatory work to be carried out (and, in some cases, it may not be possible to reach the required position at all).
Once a company has a balance sheet with assets and liabilities no greater than 150, the directors can pass a resolution at a meeting or in writing resolving to apply to the Registrar of Companies to have the company struck off the Register. The proposal must then be approved by the shareholder(s) and, subject to their approval, an advertisement giving notice of the company's intention to apply for VSO must be published in at least one daily newspaper.
Within 3 months of the passing of the shareholder's resolution and within 30 days' of publication of the newspaper advertisement, an application for VSO must be sent to the Irish Companies Registration Office (CRO), accompanied by a letter of no objection from the Revenue Commissioners. The directors of the applicant company must apply in writing to the Revenue Commissioners for this letter, which the latter will only issue if all of the company's tax returns have been made up to date.
Once an application is lodged with the CRO, the strike-off process will take approximately 3 months assuming all the paperwork is in order.
Once a company is struck-off the Register, it ceases to have any legal existence and all of its remaining property (if any) automatically vests in the Irish State (and not in the shareholder). For this reason, it is always important to carry out some level of internal due diligence to ensure that a company seeking a VSO is `clean' prior to strike-off.
Excluding potential preparatory work to reduce the balance sheet below 150, the timeline for completing a VSO from preparing the relevant documentation to final strike-off is approximately 4-5 months.
Members' Voluntary Liquidation
Most MVLs are completed in accordance with what is known as the "summary approval procedure" (SAP) set out in the Irish Companies Act 2014. The SAP procedure broadly involves board and shareholder meetings, and the execution of a formal declaration of solvency by the directors. A statement of the company's assets and liabilities (prepared to a date which is within 3 months of the date of execution of the declaration of solvency) must be prepared for the purposes of making the declaration, as well as an auditor's report stating that the directors' declaration is not unreasonable. Early engagement with the Irish auditors / accounting advisors on the preparation of the statement of assets and liabilities is recommended to ensure no delay in obtaining their sign-off on the reasonableness of the declaration of solvency which could impact the overall timeline.
Once these steps have been taken, certain filings are required to be made at the CRO and notice of the appointment of the liquidator must be published in the Official State Gazette in Ireland. At that point, the company is officially in liquidation and the liquidator assumes control of the company. The powers of the directors are effectively transferred to the liquidator who is empowered to take all actions as may be necessary for the winding up of the company (in particular to identify and distribute/settle any remaining assets and liabilities). Once all of the assets and liabilities have been settled/distributed, the liquidator will call a final shareholder meeting and make a final return to the CRO. Within 3 months of that date, the company will be formally dissolved.
The entire MVL process (from the initial board and shareholder meetings to formal dissolution of the company at the CRO) typically takes between 9-12 months. The timeline tends to be at the lower end of that scale where there are minimal or no assets and liabilities and where the directors are responsive to the liquidator's requests for information/ documentation about the company.