Why would a company get First Gazette Notice?

The First Gazette notice is the beginning of the end for a business. It causes irreversible reputational harm to directors and means creditors may never collect debts that are due from the business.

Following this, the business is at risk of being forcibly shut down without the director’s consent. If this happens, anyone associated with the affected business needs to act quickly to avoid being pulled down by the bad debt too.

That’s why it’s always advisable to know all you can about Gazette notices, strike-offs, and winding-up petitions, especially in the current economic climate where insolvencies are growing every day.

What is a First Gazette Notice?

A First Gazette Notice for compulsory strike-off is a public warning that Companies House will strike a business off their register.

This provides at least three months’ notice to the creditors of the intended action, and then if action isn’t taken, a second Gazette notice appears. This advertises the company’s dissolution and will state the company or creditors only have this period to oppose it before it’s struck off the register.

A Gazette is a public journal that allows qualified individuals such as licenced insolvency practitioners to place statutory notices in insolvency matters. All insolvency proceedings must be advertised in it by law.

There are three different Gazettes in the UK:

• London Gazette – England and Wales.
• Edinburgh Gazette – Scotland.
• Belfast Gazette – Northern Ireland.

A First Gazette Notice is essentially Companies House publicly posting their intention to strike off a company. This notification is more for creditors or partners of the business as Companies House will already have issued a communication to the company’s directors.

How could you be given a First Gazette Notice?

Companies House will actively chase businesses that fail to comply with UK regulations. If they don’t get any information or payment, it’s assumed the business is no longer trading and a First Gazette Notice is issued.

The most common ways that regulations are broken include:

• Failure to file company accounts.
• Not paying tax.
• Not paying late submission penalties.
• Failure to declare a new company address.
• Failure to submit an annual confirmation statement.
• Not appointing directors.
• Not conforming to legal requirements.
• The company has ceased trading and is inactive.

If a company breaches any regulations, Companies House will attempt to contact the company directors or persons of significant control formally. This will happen at least twice before posting a first gazette notice for compulsory strike-off – an action of last recourse.

Who does a First Gazette Notice affect?

A first gazette notice involves:

• The business it is issued against as they’re at risk of being struck off the register.
• Companies House, who issued the notice.
• Creditors that have lent to the company want to attempt to regain any outstanding debts.
• Anyone else the company does business with; they’ll be losing a partner/distributor/supplier etc. which will greatly impact their business and supply chain.

Why does it matter?

This notice is a public warning that Companies House will strike a company off its register.

After the First Gazette Notice has been issued and all creditors have been contacted, Companies House must review any appeals and evidence supplied by the company before deciding whether to go ahead with the compulsory strike-off.

The primary intention of the notice is to alert creditors of the company that they have three months to oppose the strike off, as well as inform company directors if they missed any Companies House communication.

Creditors must be informed because once a company is struck off, they will be unable to recover the debt. In some cases, directors can be personally liable for debts. For example, if it was in the initial contract terms or if the directors are found to have engaged in malpractice. Often unsecured creditors are unable to recover money owed.

If creditors want to block the strike-off, they can submit a challenge to the Companies House evidencing the debt. HMRC constantly monitors the Gazettes for these notices and often blocks the motion if there is tax debt outstanding. As one of the UK’s largest creditors, they regularly do so.

Similarly, banks keep a close eye on the Gazettes as they tend to have high-value secured loans which they would be able to recover some of it in the insolvency process. They may also freeze the accounts of clients with a notice against them and is a lengthy process to be reversed. If an operational company have its accounts frozen, its ability to conduct business would be severely limited.

Any creditors that block the strike off may submit a winding-up petition believing it is insolvent. This is much harder to reverse, has severe professional and reputational ramifications and, if successful, results in the compulsory liquidation of the company.

When should you cease doing business with someone who’s been given a First Gazette Notice?

As soon as they’ve been given a Gazette Notice you should stop doing business with them immediately as it means they’re going to be struck off.

Once a company has been struck off, it ceases to exist as a legal entity and all trade must be stopped permanently. When this happens there will be no way for you to regain any assets or collect any outstanding payments. In the unlikely scenario that a business you deal with is at risk of being struck off, we still strongly advise you to stop doing business with them. It could prove detrimental to your own company, and it also proves that they have very poor internal processes, or issues with business management, which presents a risk to your organisation.

The best way to avoid dealing with this scenario is by detecting and preventing risk before any issues ever result in a First Gazette Notice. With Red Flag Alert, you can receive a monitoring alert the second something changes for a watched business within your portfolio. This way you can act before the worst happens, manage your risk exposure and minimise big losses.

Want to try Red Flag Alert for free?

Monitoring warning signs across all UK-based clients is simply not possible for most businesses. That’s where we come in.

Red Flag Alerts act as an early warning system by providing our unique financial health rating. This allows you to easily spot which companies could default on their invoices and take preventative action to avoid this.

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If you are worried about the financial health of one of your customers and want to see how Red Flag Alert’s company credit checking solution can help, start your seven-day free trial today.