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In a recent decision, the High Court [1] considered remedies that might be available to a dissatisfied creditor concerned that a company, formerly in administration, had been dissolved before all of the company’s potential claims had been investigated and, if appropriate, pursued. In particular, the Court considered whether it was open to the creditor to (a) restore the company to the register (b) then seek a winding up order and (c) in the same application request that the winding up petition be treated as presented at some earlier date.

Facts

A company had been placed into administration and its administrator had failed to achieve any return for its creditors. The company was subsequently dissolved and the administrator gave no details of her investigations or of their outcome.

The most significant creditor in the insolvency was a bank which had a claim of just over £2 million in respect of “chargebacks” due to it. The bank identified transactions which it thought required further investigation and a year after dissolution presented a petition seeking the restoration of the company to the register and for its immediate winding up. It asked for an insolvency practitioner other than the former administrator to be appointed as liquidator.

A district judge ordered restoration but adjourned the remaining matters until the former administrator had been notified of the application. The former administrator subsequently applied for an Order that the restoration of the company be reviewed or rescinded.

Decision

The Court held that the former administrator had standing to seek relief as a “person appearing to the court to have an interest in the matter” [2]. While the Court held that an administrator would not automatically appear to have such an interest, on the facts of this case the former administrator did as she had an interest in supplementing or correcting any evidence before the Court.

It was “just” to restore the company to the register as limited investigations had been undertaken, the results of which had not been shared with creditors, and respectable professional opinion considered that there were matters which warranted investigation in an attempt to recover assets for creditors. In this regard, the Court commented that winding up has a wider purpose than simply the collection, realisation and distribution of assets and restoration may be justified even if at the time it could not be demonstrated that assets were likely to be recovered.

A winding up order was plainly appropriate. An insolvent company ought to be restored to the register if some mechanism is put in place for its eventual dissolution when the purpose of restoration is exhausted or achieved.

The Court was empowered to “…give such directions and make such provision as seems just for placing the company and all other persons in the same position (as nearly as may be) as if the company had not been dissolved..” [3]. A liquidator could fall within the general category of “all other persons” to be placed in the same position as if the company had not been dissolved and the Court could create a seamless insolvency by deeming the petition to have been presented on some date other than the actual date of presentation, with a direction that the period between the date of dissolution and the date of restoration would not be counted for the purpose of limitation in respect of any proceedings that may be brought by the company. However that jurisdiction had to be exercised with extreme caution. The Court must be satisfied that it is “just” to give the direction.

In this case it was not “just” to make the direction as the evidence did not clarify what had been discovered after the dissolution and why the bank did not apply to suspend dissolution or petition to wind-up before the company was dissolved, but subsequently felt able to do so.

In addition, given that the counterparties to the transactions which warranted further investigation were known they should have been notified as fairness required that third parties who would be prejudiced by the direction sought should be given the opportunity to be heard.

The Court commented that even if it had been prepared to direct that the petition be deemed to be presented on the date of dissolution and not on the date of actual presentation it would by no means be clear that this would have created a seamless insolvency so as to enable the liquidator to backdate the onset of insolvency. This would depend on how the three month period between registration of the notice of dissolution and actual dissolution is treated. This must be argued in an appropriate case.

This post was edited by Nadine Herman. For more information, email blogs@gateleyplc.com.

[1] Barclays Bank Plc v Registrar of Companies [2015] EWHC 2806 (Ch)

[2] Section 1029(2) of the Companies Act 2006

[3] Section 1032(3) of the Companies Act 2006


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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.