In this edition of ‘Law in the Spotlight’ Rooks Rider Solicitors’ Chief Executive Walter Cha talks to Gemma Newing, Head of Dispute Resolution, about taking steps to restore a dissolved company to the register at Companies House and predictions for the forthcoming months as we gradually emerge from lockdown.
How does a company come to be dissolved and struck off the register at Companies House?
There are a number of ways this can arise.
Typically, this is through inactivity of the company. For example, accounts and annual returns may not have been filed by their required dates, or if there are no registered directors, this will lead the registrar of companies, at Companies House, to believe the company is no longer carrying on business and nor is it in operation.
A company may also be struck off if it was in an insolvency procedure before being struck off. For example, if the company was dissolved after being wound up or administration or following a voluntary strike off.
What do you see to be the main cause for a company being struck off?
A frequent scenario arises where a management company owns the freehold to a property which is made up of a number of flats. Often, the directors of the management company will be occupiers of the flats. However, directors of the company may not necessarily be resident in the flats, and the administrative aspects of the management company can fall into a state of decline, which can result in the company being struck off. This may go unnoticed with it often coming to light when a leaseholder looks to sell their flat and the issue of the company being struck off is seen.
Why would a company need to be restored to the register?
If a company has been struck off the register, a situation can arise where the company needs to be restored to the register, for example:
- At the time the company was struck off the register and dissolved, it still owned property. If this situation occurs, the property in the company’s name is vested in the Crown – referred to as bona vacantia.
- The company was still carrying on business at the time the company was struck off the register.
- A claim needs to be brought against the company, and in order to do so, it must be restored.
How can a company be restored?
There are two processes that can be used, and their use will be subject to the manner in which the strike off came about.
Administrative restoration can be used where the company has failed to keep up to date with filings at Companies House. Either a director or shareholder can make the application, which must be made no more than 6 years from the date of dissolution. This process cannot be used if the company was voluntarily struck off the register.
The other process is by Court order. This will typically be appropriate if the company was dissolved following winding up or administration procedures, or if the company was voluntarily struck off but now needs to be restored. Unlike administrative restoration, there is a wider group of parties who can apply for restoration, which includes a former director, shareholder, a creditor of the company at the time of strike off, a party who has a potential legal claim against the company, by way of example. Any such application will need to be brought within the period of 6 years from dissolution.
What are your predictions for the coming months in regards to the dissolution of a business due to COVID-19?
For a period of time, Companies House extended deadlines for filings, and briefly put a freeze on striking off companies due to the global pandemic. However, in February 2021 Companies House announced that from 8 March 2021 it would recommence its compulsory and voluntary strike off process.
Because of this, I anticipate there will be a greater number of companies who have been struck off that may need to be restored, owing to deadlines having been missed due to circumstances that may have arisen as a result of the pandemic.
In order to avoid having to restore a company, it is prudent for directors to take steps to ensure they are up to date with filings for the company.