Reporting a Dissolved Company That Is Still Trading

Article summary:

• You can report a dissolved company that is still trading to the Insolvency Service online or in writing
• The Insolvency Service now has expanded powers to investigate and penalise those responsible for trading through a dissolved company
• When a company is closed down, it is ‘struck off’ the Companies Register, also known as a ‘dissolved’ company
• A dissolved company is prohibited from trading by law
• Any director found to have been trading through a dissolved company may face serious legal action, including disqualification, liability for debts, and even imprisonment
• A Company Law Solicitor can explain the legal options available to you and take action to protect your interests and recover what is owed to you.

You can report a dissolved company that is still trading to the Compliance and Targeting Investigations and Enforcement Services department of the Insolvency Service either online or in writing. The Insolvency Service now has expanded legal powers to investigate and take action against directors for misconduct, including continuing to trade. In this article, we will look at how to report a dissolved company that is still trading.

Can I complain to the Insolvency Service if a dissolved company is still trading?

You can make a complaint to the Insolvency Service if a dissolved company owes you money from doing something illegal or wrong (e.g. a scam or fraud), or you believe the company has done something illegal or wrong (e.g. continued to trade while dissolved), even if they do not owe you money. In addition, you can apply to have a dissolved company restored to the register of companies if it owes you money, or you:

• Did business with them
• Worked for them
• Are responsible for their employee pension fund
• Have a shared or competing interest in land
• Were a shareholder or director when it was dissolved

How can I report a dissolved Company that is still trading?

To report a dissolved company for continuing to trade, you can either fill out a complaint form online on the UK government website, request a form by phoning 0303 003 1744 or by writing to:

Compliance and Targeting

Investigations and Enforcement Services

Insolvency Service

3rd Floor Cannon House

18 Priory Queensway

Birmingham

B4 6FD

If the Insolvency Service believes that your complaint is of a serious nature, they will either conduct an investigation or refer your matter to another relevant body. They may also carry out a criminal investigation if the company has committed an offence. 

Is it illegal for a dissolved company?

If a dissolved company continues to trade, it is operating unlawfully. When a company is closed down, it is ‘struck off’ the Companies Register, also known as ‘dissolution’. A company can only be dissolved if it:

• Has not traded or sold off any stock in the last 3 months
• Has not changed names in the last 3 months
• Is not threatened with liquidation
• Has no agreements with creditors (e.g. a CVA)

Once a company is dissolved, it ceases to exist as a legal entity; all trading must cease, directors lose access to company bank accounts, and they can no longer incur debt, send or receive money through the business or enter into contracts. If the directors wish to later resume trading, they must first apply to have the company restored.

Trading while dissolved is not only illegal, it can cause significant harm to creditors, customers, and suppliers who may wrongly believe they are dealing with a legitimate, solvent business. 

What is the penalty for trading while dissolved?

The Insolvency Service now has expanded powers to investigate and prosecute former directors of dissolved companies without the need to restore the company to the register. Former directors responsible for trading through a dissolved company may face serious legal and financial penalties, including:

• Unlimited fines or imprisonment for serious misconduct, such as fraudulent trading
• Personal liability for any debts incurred after dissolution (in other words, they are not protected by limited liability)
• Recovery action by creditors
• Potential criminal penalties if the conduct amounts to fraudulent trading
• Director disqualification for up to 15 years

In recent years, the government has ratcheted up efforts to clamp down on this type of activity, especially ‘phoenixing’ whereby directors close one company and start another to avoid liabilities.

Directors found guilty of wrongful or fraudulent trading can be pursued under the Insolvency Act 1986 and the Company Directors Disqualification Act 1986. Creditors may also be able to apply to the courts to have the company restored to the register so they can recover assets.

When will the Insolvency Service investigate a dissolved company?

The Insolvency Service may investigate a dissolved company in any of the following situations:

• The company appears to have engaged in serious misconduct, such as corporate abuse, fraud, scams, or other unethical activities.
• A director has failed to ensure the company complied with all statutory requirements, resulting in unpaid fines or unresolved enforcement actions, e.g. outstanding penalties for breaches of health and safety, immigration, or environmental laws.
• A director has carried on the same business by repeatedly trading through successive companies, each of which becomes insolvent (unable to pay its debts) – so-called ‘phoenix companies’
• A director has consistently operated under the protection of limited liability without adhering to the required rules, such as having a record of serious or repeated defaults in company filings.
• A director failed to comply with legal requirements when applying to have a company struck off the Companies House register.

It is important to note that any breaches of the rules in relation to the filing of documents at Companies House are handled by Companies House, not the Insolvency Service.

Final words

The Insolvency Service now has expanded powers to investigate and penalise those responsible for trading through a dissolved company. As we have discussed in this article, trading as a dissolved company is illegal and carries serious consequences for those involved. If you are a customer, supplier, creditor or other stakeholder who has been affected by such practices, do not hesitate to issue a complaint to the Insolvency Service. This is the best way to protect your position. If a dissolved company is continuing to trade and this has caused you or your business financial, legal or reputation harm, speak to a company law Solicitor. We will promptly review your situation and recommend all the legal options available to you and take action to protect your interests and recover what is owed to you.

FAQs

How can I report a dissolved company that is still trading?
You can report a dissolved company to the Insolvency Service either online, by phone, or in writing. Complaints are handled by the Compliance and Targeting Investigations and Enforcement Services department. If the issue is serious, the Insolvency Service may investigate or refer the matter to another relevant authority.

Is it illegal for a dissolved company to continue trading?
Yes. Once a company is dissolved, it no longer exists as a legal entity and is prohibited from trading. Directors cannot access company bank accounts, incur debts, or enter into contracts. Continuing to trade while dissolved is unlawful and can mislead creditors, customers, and suppliers.

What penalties can directors face for trading while dissolved?
Penalties can include unlimited fines, imprisonment for serious misconduct, personal liability for debts, recovery actions by creditors, and director disqualification for up to 15 years. Serious cases, such as fraudulent trading, can lead to criminal prosecution.

When will the Insolvency Service investigate a dissolved company?
Investigations may take place if there is evidence of serious misconduct such as fraud, scams, corporate abuse, repeated use of ‘phoenix’ companies, or breaches of statutory requirements. The Insolvency Service can now pursue former directors without restoring the company to the register.

Can I take legal action if I have been affected by a dissolved company trading illegally?
Yes. You can issue a complaint to the Insolvency Service and seek legal advice from a Company Law Solicitor. They can explain your options, which may include recovering debts, restoring the company to the register, or pursuing directors personally for losses.

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