There are many ways in which a company can find itself being struck of the Register of Companies (the “Register”) and dissolved, and essentially ceasing to exist. This can range from positive action by third parties, such as compulsory liquidation, or simple inaction by the company’s officials, such as failing to file accounts and respond to letters from the Registrar of Companies. Striking off and dissolution do not occur at the same time, and it is possible for a company to be struck off but restored to the Register before it is actually dissolved.
The repercussions that strike off and dissolution can have for a company, and those with an interest in it, are very serious. Once a company is dissolved, all of its property and rights owned by, or held on trust for, the company pass into the ownership of someone else. That someone is not, as some may expect, the shareholders of the company, but is in fact the Crown. The Crown’s ownership of the company’s assets is subject to either the Crown’s refusal to accept property (a disclaimer), or the restoration of the company to the Register. The former requires interested parties to raise a specific court action, and will not be covered in this article.
There are two types of restoration to the Register, the mechanism of which depending upon under what section(s) of the Companies Act 2006 the company was originally struck off the Register.
Administrative Restoration
The first type is administrative restoration. This involves an application to the Registrar of Companies for restoration of the company to the Register. This must be done within six years of the company having been dissolved, and may only be done by a former director of the company, or a former member (eg a former shareholder).
There are various requirements that must be met before the company will be restored in this manner, including gaining the consent of the Crown’s representative if they have acquired ownership of any of the company’s assets, and paying their expenses in connection with dealing with both the property and the application.
For example, let us imagine a small business that owns a vacant building that does not attract any taxes or outgoings. The director becomes ill, and is unable to deal with letters from the Registrar. The company is struck off. The director (or a shareholder) could use this process to ensure that the company is restored to the Register in order that the asset (the vacant building) could be, for example, sold or leased by the company.
Court Restoration
The second type is court restoration, and may be used as a substitute to administrative restoration. However, it is also accessible to a wider class of persons, and in some instances without time limit.
Court restoration involves an application to court for restoration of the company to the Register. Generally the same six year rule applies, although it is subject to some exceptions. Notably, there is no time limit where the purpose of restoration is to bring proceedings against the company in respect of damages for personal injury. The usual personal injury time bar continues to apply, and a court will refuse an application for restoration if the underlying personal injury claim is time barred.
This avenue also allows for a wider class of persons to apply to court than would be allowed under the administrative restoration regime. Of note, it includes those who have a potential legal claim against the company, the personal representatives of a former member, and those who would have been (but for dissolution) in a contractual relationship with the company.
Two examples shed light on the utility of this mechanism. Firstly, the 2014 case of Liberty Mercian Limited v Cuddy Engineering Limited and Others [2014] EWHC 3584 (TCC) provides an interesting example of interplay between dissolution and contracts.
In this English case, the Claimant had contracted with the Defendants for them to provide building works. In turn, the Defendants sub-contracted works to a third party, Quantum (GB) Limited. The Defendants required to obtain a warranty from Quantum for the benefit of the Claimant in respect of the works. The Defendant did not do so, and Quantum was subsequently struck off the Register and dissolved. The Court held that the Defendants were required to obtain the warranty from Quantum, even if this involved Quantum’s restoration to the Register. This was on the basis that Quantum was likely to have had professional indemnity insurance in place during the works, and that the Claimant would then be able to look to Quantum’s insurers should defects in the works arise.
A second example focuses on those who claim to have sustained personal injury at the fault of a dissolved company. A succinct example of this would be someone who has recently discovered that they have developed mesothelioma as a result of having worked with asbestos for several companies over the years, namely company x, company y and company z. It is settled law that the victim may bring an action against any of the three companies (Compensation Act 2006, s.3; Zurich Insurance PLC UK Branch v International Energy Group Limited [2015] UKSC 33) for 100% of the compensation, and the defender company would then be able to claim contributions from the other liable companies.
In this example, let us imagine that all three companies carried the appropriate insurance to cover this risk during the periods where the victim worked for them, and that all three are dissolved. The victim could apply to the court to restore company x to the Register in order to bring proceedings against, in essence, that company’s insurer. If successful, company x’s insurer may then apply to the court to restore companies y and z to the Register in order to bring proceedings against their insurers in order to recover a contribution of the costs that the victim had been awarded.
Summary
In summary, lawyers should be alive to the fact that just because a company has been dissolved, it does not mean that any hope of recovering sums from them has fallen away. Even where a company was insolvent prior to dissolution, there may yet be an insurance policy lurking in the background that could be required to compensate for either, for example, a breach of contract or delict.
Contact our Litigation Solicitors in Glasgow
Miller Samuel LLP is able to assist with either administrative or court restoration, and the underlying claim in respect of the latter. Should you require to have a company restored, or bring a claim against a dissolved company, our litigation team can ensure that you receive the best possible outcome. This article is for general information only. Nothing in this article should be taken as legal advice. If you have any queries on the content of this article please contact us.
