A DS01 strike-off application can be a perfectly legitimate route to close down a limited company, even if it has debts.
Yet, time again and time again, I come across directors who’ve been told by insolvency practitioners that a CVL is the only option. They’re urged to borrow money they don’t have, to fund a formal liquidation they don’t need, often from firms whose business model depends on pushing as many CVLs through the door as possible.
Sometimes it’s based on genuine misunderstanding. Sometimes it’s not. Either way, the result is the same: bad advice, leading to unnecessary cost, delivered by someone who profits directly from the outcome.
That’s not just poor service. That’s a conflict of interest – and one that needs to be addressed at the highest levels of the profession.
What the Law Actually Says
The Companies Act 2006 allows a company to apply to be struck off using a DS01 form under section 1003. Nowhere in the Act does it say the process can only be used if the company is debt-free. In fact, it anticipates that there may be real creditors involved – because the law requires that they be notified.
Let’s look at Section 1006, which says:
A company making an application under section 1003 must, within seven days of sending the application to the registrar, give a copy to—
(a) every member of the company,
(b) every creditor of the company,
(c) every employee,
(d) any director who hasn’t signed the application,
(e) and anyone who becomes one of the above thereafter.
Note the use of the word ‘creditor’ includes contingent and prospective liabilities (section 1011 Companies Act 2006). The inclusion of the word creditor proves that Parliament drafted this process with the presence of debts in mind.
What’s more, there is no upper or lower limit on debt (or indeed assets) stated in the legislation. In my view, that’s a legislative flaw. We impose thresholds elsewhere in insolvency law, so why not here? But the absence of limits doesn’t change the fact that the process is lawful.
When a Misunderstanding Becomes Misconduct
A recent LinkedIn exchange with a fellow IP laid bare just how widely misunderstood this area is.
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The IP claimed DS01s cannot be used where creditors are owed money.
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He implied directors are legally obliged to fund a CVL.
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He stated he would always advise a CVL, even where there were no assets or means to fund it.
All of these points are wrong. And more worryingly, they’re being repeated by others who should know better.
This IP had passed the JIEB exams. But clearly hadn’t been taught—or hasn’t maintained—an accurate understanding of this area. And he’s not alone.
This isn’t about splitting hairs. It’s about real-life consequences for struggling directors who end up paying thousands of pounds unnecessarily, purely because the adviser earns a fee from that route.
Connells, Conflicts, and the Insolvency Profession
If this were any other profession, we’d call it out for what it is: a conflicted sale.
Think of the Connells case, where an estate agency came under scrutiny for pushing buyers towards in-house mortgage advisers, with no proper consideration of alternatives. That raised serious questions of independence, transparency, and fairness.
Why should insolvency practitioners be held to a lower standard?
When you advise someone to spend money on a service you are selling, and there’s no legal obligation to do so, you have a duty to make sure that advice is objectively in their best interests – not yours.
Otherwise, you’re not an adviser. You’re a salesperson. And our profession deserves better.
The Real Duties of the IP
Let’s be clear about our professional responsibilities.
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When an IP is first consulted, their duty is to the company.
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When they are closer on to getting appointed as appointed as liquidator, their duty shifts to the creditors.
That initial meeting with the director is not an opportunity to lock in a fee, especially for going down the wrong route. It’s the moment to give genuinely impartial, professional guidance – even if that means advising the director not to appoint you.
How many IPs truly recognise that? And how many are trained, tested, or monitored on this?
What the Regulators and Educators Must Do
We urgently need:
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A new SIP (Statement of Insolvency Practice) or guidance note on best advice during pre-appointment discussions.
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Monitoring visits that examine how initial advice was framed, not just whether the right forms were filed.
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An overhaul of JIEB, CPI training and CPD, so the law around strike-offs and ethical advice isn’t misunderstood by those who should be experts.
To be blunt, some of the CVL factory models that dominate the market only survive because bad advice is being given. Remove that, and the model collapses.
HMRC’s Role: Objections Without Action?
When DS01s are submitted, HMRC frequently object – but rarely follow through with a winding-up petition. What happens instead?
The company continues to sit on the register, fails to file accounts or confirmation statements, and gets struck off anyway, a year or so later.
So what did the objection actually achieve?
If HMRC believes the process is being misused, it should act decisively and not just delay the inevitable.
A Balanced Conclusion
Let me be absolutely clear:
No one—myself included—wants to see the DS01 process used wrongly.
If there are employee claims, overdrawn director loan accounts, clear signs of misconduct, or other complicating issues needing addressing, then a CVL is the proper route.
But just as importantly, I do not want to see directors being pressured into CVLs they do not need, funded with money they can’t afford, simply to enable the IP to earn a fee.
That’s not advice.
That’s not professionalism.
That’s not ethical.
We can and must do better – for the sake of our clients, our profession, and our own integrity.
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