When a company is dissolved or struck off the Register of Companies it ceases to exist. Property belonging to the dissolved company vests in the Crown to be disposed of. However, that is not always the end of the matter and in certain circumstances it is possible to restore a company to the Register.
Why restore a company?
Once restored, the company is deemed to have continued in existence as if it had never been dissolved or struck off. Restoration can therefore be a useful tool for creditors or former shareholders to pursue a claim against the company or against third parties connected to it such as a guarantor. It can also allow assets of the company (for example, heritable property) to be dealt with.
There are two main routes to restore a company:
- Administrative restoration, or
- Restoration by court order.
Administrative restoration
As the name suggests, administrative restoration is the cheapest and most straightforward way to restore a company. A former member or director may apply to Companies House to have the company restored provided this is done within six years of its dissolution.
To qualify, the company must have been carrying on business or in operation at the time it was struck off and the applicant must obtain the Crown’s consent to the restoration. All outstanding fines must be paid and the documents necessary to bring the company up to date (for example, accounts and confirmation statements) must be filed.
An application form and a cheque for £468 are then sent to Companies House and, all going well, the company will be restored.
Court restoration
There are circumstances where administrative restoration is not an option. For example, if a company was in an insolvency process (such as liquidation or administration) prior to its dissolution, a court order will be required to restore it to the Register.
Section 1029 of the Companies Act 2006 sets out a specific list of those who can apply (such as creditors or those who were in a contractual relationship with the company). It also provides that any person appearing to the court to have an interest in the matter may apply for restoration. Common applicants include creditors, former directors, shareholders or liquidators of the company.
The general rule is that an application must be made within six years of the company’s dissolution. However, if the purpose of the restoration is to pursue a claim for damages for personal injury against the company, the application may be made at any time. A petition is drafted and lodged in either the Court of Session or the sheriff court closest to the company’s registered office. If the company’s share capital exceeds £120,000, the petition should be raised in the Court of Session. The petition should explain how the company came to be dissolved and the reasons why restoration is sought. Provided there are no preliminary issues, the court will then grant permission to serve and advertise the petition.
The petition must be served on all parties who may have an interest in the restoration of the company. This will normally include the previous directors (if they are not the applicant). The petition must also be served on:
- The Crown (through the King’s and Lord Treasurer’s Remembrancer)
- Companies House
- The Lord Advocate
The petition will then be advertised in the Edinburgh Gazette and a local newspaper. Any interested party will have a set period after the date of advertisement or service (whichever is later) to lodge answers, normally between 8 and 21 days. If no answers are lodged, the court will usually grant the petition and restore the company to the Register. If answers are lodged, the court will assign a hearing to determine whether the company should be restored.
What if restoration is opposed?
Defended petitions to restore a company are rare but they do happen (see our article on the leading Scottish case from the Inner House here). Reasons for opposition may be that the applicant does not have the right to raise the application or has no interest in restoring the company. There have also been cases where it has been argued that the potential claim against the company is so flawed that restoring the company would not serve any relevant purpose.
The test for the court is whether it is “just” to restore the company. The test is broad and discretionary and the threshold for success is relatively low. Generally, the court’s view is that unless there are special circumstances such as the claim being based on fraud or falsehood, restoration should be granted. The court will generally favour restoring the company and leave any issues concerning the merits of any underlying claim against the company which may be driving the restoration to be determined in another court.
Post-restoration
Once the company is restored, the court will issue its order and appoint the clerk of court to intimate a copy of the order to Companies House to update the Register of Companies. Confirmation of the restoration will also be advertised in the Edinburgh Gazette. Once the purpose of the restoration has taken place, the company will normally be dissolved again.
Restoring a company, particularly through the court process, can be complex and legal advice should be sought to effectively navigate the process. Our expert team regularly handles restoration petitions and is ready to guide you through every step should you need advice or support, contact us here.
