When a company is dissolved, section 1012 of the Companies Act 2006 provides that all property and rights vested in the company immediately before its dissolution are deemed to be “bona vacantia” – ie ownerless property – and vest in the Crown. However, this is not necessarily the end of the matter because the Treasury Solicitor has the power to disclaim assets vested in the Crown to protect it from onerous liabilities.
Disclaimer extinguishes the title and, in such circumstances, freehold land automatically “escheats” – or reverts – to the Crown, as lord paramount. Then, only if, exceptionally, the Crown takes possession of or starts to manage the property, might it assume any liabilities in respect of it.
Escheat is relatively rare in this day and age, but it can and does occur if a company is dissolved and property is overlooked. This is exactly what happened in Re Fivestar Properties Ltd [2015] EWHC 2782 (Ch); [2015] PLSCS 277. Following the dissolution of the company, a freehold property vested as bona vacantia in the Crown. The property was charged to a lender and was let to a business tenant, who served notice of his request for a new business lease on the Crown, which promptly disclaimed any interest in the land. The lender was forced to apply for the restoration of the company to the register to facilitate the completion of a new lease and a subsequent sale, subject to and with the benefit of the tenancy, in order to discharge or reduce the company’s debt to the bank.
What was the effect on the freehold of restoration of the company to the register? Did the company re-acquire title to the land on its restoration to the register? Or had the land been lost to the company for ever?
The court explained that 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: section 1032. Therefore, subject to the possibility that the Crown has in the meantime made a disposition of the property – in which case section 1034 provides that the court can direct the Crown to compensate the company for the value of the property that has been disposed of – the company is deemed always to have been the owner of the property, as if it had never been dissolved.
A disclaimer does not operate as a “disposition”: Allied Dunbar Assurance plc v Fowle [1994] 1 EGLR 122. Therefore, the effect of restoration of the company to the register was that the freehold estate was retrospectively re-created and re-vested in the company as if it had never been dissolved and as if the freehold had never been disclaimed.
It is interesting to compare the decision in Fivestar with ELB Securities Ltd v Alan Love & Prestwick Hotels Ltd [2015] CSIH 67, where the outcome was markedly different despite the fact that the Scottish court was considering exactly the same legislation. It seems that, in England, property re-vests in a company, whereas, in Scotland, it does not.
Allyson Colby is a property law consultant