Stop and think!
Dissolving a company may seem like the best course of action to declutter a group of companies, or if a company no longer seems to serve an ongoing purpose.
But it is absolutely critical that before dissolving a company, you check whether it holds any assets. Companies holding real estate can sometimes be wound up without due consideration – causing significant costs and meaning the property is effectively frozen.
You also need to bear in mind that the company may have ongoing obligations or liabilities (e.g. under a warranty or indemnity).
There is the risk of a company being dissolved through an involuntary strike off if a company has not met its statutory obligations (e.g. filing its annual accounts).
What happens if a company has been mistakenly wound up?
It is possible to restore the company to the register of companies.
There are two main ways of doing so:
- by applying to the Registrar of Companies House for administrative restoration (this is only available in limited circumstances); or
- by making an application to court for a restoration order.
What happens to the property owned by the company?
When a company is dissolved, any property that it owns in England and Wales automatically passes to the Crown.
The property is known as bona vacantia (meaning "ownerless goods"). The Crown may disclaim title to the property, or sell it for full market value.
If the Crown disclaims title to freehold property, ownership of the land transfers to the Crown Estate. For leasehold property, the leasehold title will be extinguished (after a waiting period of 14 days in which a subtenant or lender can apply for a vesting order). It is normally Crown policy to disclaim commercial leases at market rent and other onerous properties.
How do I get it back?
If the company is restored, it is deemed to have continued in existence since it was dissolved and any assets will belong to the company again.
If you're applying for administrative restoration where the company owned a property, you need to obtain the consent from the Treasury Solicitor first. The process is fairly straightforward if the Treasury Solicitor has not already done anything with the property – you email a completed form to the Treasury Solicitor and pay their costs of £64.
If the Crown has disposed of the property, it will owe compensation to the restored company (the amount of any consideration less the Crown's reasonable costs in dealing with the property). In practice, the Crown would usually be unaware that the property has passed to it until you approach the Treasury Solicitor.
Alternatively, instead of restoring the company, you could approach the Treasury Solicitor and negotiate a transfer of the property back to a group company or direct to a purchaser. However, such a transfer would have to be at full market value. So this would only be a viable option where the asset is of minimal value, such as a rack-rented lease.
What happens to security over assets belonging to a dissolved company?
If a freehold property is disclaimed and passes to the Crown Estate, this does not affect a lender's statutory power of sale. Any surplus after the sale of the property would pass to the Crown Estate.
If leasehold property is disclaimed by the Crown, then the lender may apply to the court for an order for the property to be vested in the lender.
Remember to stop and think before you dissolve a company. Although a company can be restored, this takes time, significant cost and administrative hassle. Most importantly, it could delay (or in a worst case scenario abort) a sale or financing.