Incorporating a Company – Know your Obligations
In this Blog Kristy Ainge, of our Litigation Department, discusses why it is important to be aware of your obligations in respect of your Company.
If you incorporate a company it is vital to ensure that you know exactly what you need to do in terms of complying with legislation and the Companies Act. If you fail to comply with any of your obligations, then your company is at risk of being dissolved or struck off Companies House, for example, if you fail to file accounts.
This can cause complications, particularly when the company owns assets such as a property, piece of land, a vehicle, machinery, or even its own business name.
Once a company has been dissolved or struck off, action is needed to restore it either by an application for administrative restoration (available only to the former directors or shareholders if they requested that the company be removed from the register) made to Companies House or by an application to court. This can be done within 6 years of the strike off or dissolution. If you fail to realise your Company has been struck off or dissolved after 6 years, you will then have to make an application to the Treasury Solicitor for a bona vacantia grant to deal with any assets.
Generally a court order is needed to restore a company to Companies House. There are various reasons for restoring a company but the main reasons why a former shareholder or director might need to do so are either to enable assets to be claimed/dealt with, or to continue with business under the Company name.
The applicant (i.e. director or shareholder) must file a claim form at the court with supporting evidence outlining why the Company was struck off/dissolved, and why it needs to be restored to the register.
In most cases, the Treasury Solicitor will issue a letter confirming that it has no objection to the restoration. The court may then deal with the application without holding a hearing, and grant an order that the company be restored to the Register.
The general effect of an order by the court for restoration to the register is that the company is deemed to have continued in existence as if it had not been dissolved or struck off the register, and can continue with its business as usual.
When a company registered in England and Wales is dissolved while it still owns or has an interest in property, that property will be deemed bona vacantia (meaning 'ownerless property') at the date of dissolution, and will vest in and belong to the Crown.
After 6 years it is no longer possible to restore the Company to the register, which is why the property has to be dealt with as bona vacantia.
If a company was holding property on behalf of another person immediately before the company was dissolved, the trustee or owner can apply to the court to transfer the property to them rather than to the crown. This application is a vesting order. For example, if the only director and shareholder of a company provided the company with the money to purchase a property or land on trust for them, then that shareholder/director, should be able to apply to the court to get the property transferred to him/her.
Again, a claim form and supporting evidence is required to be issued at Court and served on the Treasury Solicitor acting for the Attorney General (the Crown). If, the Attorney General is satisfied that a trust is established, the Crown will not claim the property as bona vacantia and will not oppose the vesting order. A hearing is still neessary and the Judge will still consider the evidence carefully to be satisfied that the Applicant can establish a trust. If the Applicant can establish a trust, then the court will order that the property vests in the claimant.
We have recently acted on behalf of a sole director and shareholder failing to file company accounts for his dormant company. The company was incorporated for the sole purpose of buying some land and the Director assumed his accountant would deal with this. Unfortunately, he didn't file accounts, which meant the company was struck off, unbeknown to the Director. More than 6 years later, the Director instructed our commercial property department to sell the land which was still in the company's name. Unfortunately, it then transpired that the company had been struck off, and as it had been more than 6 years, the only way he could reclaim his property was by a bona vacantia grant.
We did this for him, the Attorney General consented, and the Judge approved the order sought, which meant that the property could then be transferred into the director's name at the Land Registry. It is important to note that the company does not go back onto Companies House and re-exist.
It is important that Directors understand the duties imposed on them by legislation when incorporating a company, because, it is time consuming and can be costly to sort matters out with no guarantee always a success.
If you require any advice about your statutory obligations of being a director or shareholder, then please contact Sean Byrne or Marta Fisher in our Corporate & Commercial Department. Alternatively, if you need assistance in respect of restoring a company to Companies House or applying for a bona-vacantia grant to deal with property, please contact Kristy Ainge, who has experience with both types of these matters. We are happy to discuss any concerns with you.