It is occasionally the case that a company which has been dissolved will have an asset remaining, which automatically vests in the Crown bona vacantia. This can arise however the dissolution occurred, whether:
- Voluntary strike-off by application of the directors or members;
- Compulsory strike-off initiated by the Registrar of Companies for failure to comply with filing obligations; or
- at the conclusion of an insolvency process such as liquidation or administration.
Often the bona vacantia asset will have been inadvertently overlooked, such as a cash balance in a unused bank account, a cause of action, a trademark left in a subsidiary of a group, or a forgotten interest in land. While there are certain checks that companies can do before a voluntary strike off occurs (e.g. a PN11 search of the land registry to check for registered titles in the company’s name), sometimes the strike-off happens without the participation of the company’s members or directors.
Sometimes the nature of the asset meant it could not have been identified or foreseen at the time of dissolution. For example, recently some high street banks have been reviewing their fees on certain products and services dating back several years, triggering refunds to many customers, including some corporate customers which in the meantime had been dissolved.
While it is clear and well understood that property which has vested bona vacantia is restored to a company upon its restoration (either by administrative restoration or restoration by Court order), a recent decision has covered what happens if property which vests in the Crown bona vacantia is disclaimed by the Crown between dissolution and restoration of the company.
In the above decision, given by Judge Halliwell (sitting as a High Court judge in the Manchester District Registry), the Court was asked to consider this question in the context of a leasehold property registered in the name of Buzzlines Coaches Limited prior to that company’s dissolution. After dissolution, the interest in the property was disclaimed by the Crown.
The land was charged to Mistral Asset Finance Ltd, who sought, among other relief, the restoration of Buzzlines Coaches Limited. It is settled law that a lender’s rights pursuant to a charge will survive Crown disclaimer, but in the decision the judge considered whether the disclaimer prevented the restoration of the leasehold property to the company when the restoration of the company became effective.
The judge drew a distinction between disclaimer and disposition by the Crown in the period while a company is dissolved. With the latter, the restoration of a company will not restore the property disposed of to the company, because it has been transferred to the Crown to a third party. However, the judge held that Crown disclaimer does not survive restoration, so when the company is restored, the interest in the property is restored to the company notwithstanding the disclaimer. In this case the judge went on to find that the lender’s charge remained vested in the lender, meaning it still had valuable security.
It is important to note that this only applies to Crown disclaimer post-dissolution, and so disclaimer by a liquidator pre-dissolution is treated differently.
Dealing with bona vacantia assets and restoration can be difficult. Ashfords has a wealth of experience in these matters. For further information, please contact a member of our Restructuring & Insolvency Team.