Understanding Ownerless Company Assets: Legal Implications and Possible Remedies

What are ownerless company assets?

The assets used by a company in carrying out its business are typically owned either by the company itself or a connected company within in a corporate group structure. If the company that owns the assets is dissolved and struck off Companies House public register, the assets that were owned become bona vacantia (meaning, "vacant goods") and automatically pass to the Crown. This insight article aims to explore the rules concerning bona vacantia assets located in the UK that once belonged to a dissolved "UK" company and what can be done to remedy their ownerless state.

Please be aware that if:

• the UK assets that became ownerless belonged to an overseas company; or

• some of the assets of a dissolved UK company are located overseas,

the company assets in these two scenarios are likely to be treated differently and may not pass to the UK Crown – if this is your situation please get in touch with a member of Brodies Corporate Team for more information and assistance.

What happens when assets become ownerless?

When the assets of a dissolved "UK" company become ownerless then in terms of the Companies Act 2006 ownership automatically passes to the Crown. Who deals with that property on behalf of the Crown will depend on:

• the last registered office address of the company; and
• where the asset is situated in the UK

If the dissolved company's last registered office and assets were situated in:

• Scotland – the assets will be dealt with by the King's and Lord Treasurer's Remembrancer ("KLTR")
• England and Wales (but not in the Duchies of Cornwall or Lancaster) – the assets will be dealt with by the Treasury Solicitor
• Duchies of Cornwall or Lancaster – the assets will be dealt with by the Duchies' solicitors, Messrs Farrer & Co
• Northern Ireland – the assets will be dealt with by the Crown Solicitor's Office

If the last registered office and the asset are in different jurisdictions, it is usually the last registered office that determines who will deal with the dissolved company's assets.

The Crown is not obliged to deal with bona vacantia property in any particular way. Usually, the Crown will either sell the property for its market value or disclaim it under the provisions of the Companies Act 2006. The Crown has three years to disclaim bona vacantia property and the effect of a disclaimer is to remove the Crown interest so that the property becomes truly ownerless – a disclaimer by the Crown cannot be reversed. Where company shares are disclaimed this does not affect the interest of any third party. For example, a creditor may still request that the shares are transferred to them to help meet the cost of any liabilities owed to it by the dissolved company.

What happens if the dissolved company is restored to the register?

Where a company has been dissolved and struck off Companies House public register it may be possible to have the company restored to the register. The Companies Act 2006 allows for a dissolved company to be restored either administratively or by the court – please see further details in our previous blog here. When a company is restored it is deemed to continue as if it had never been struck off and any property that it owned and had become ownerless is generally (but not always) deemed to be owned by the company once again.

Whether a restored company becomes the owner of its assets again will often depend on whether the Crown has sold or disclaimed them. If possible the assets will be returned to the a restored company. However, if they have been sold or transferred by the Crown then they are lost to the company and the Crown will likely pay compensation to the company equal to the consideration it received for the asset less the reasonable costs of dealing with it. There is, however, case law that indicates this is not so for all types of assets. In particular, the law appears to differ as between Scotland and England and Wales in respect of leasehold property.

In ELB Securities Limited v Love & Anor [2015] CSIH 76 one of the defenders was a company that had consistently failed to file statutory accounts and consequently had been struck off the register. Prior to being struck off the company had leased property from ELB Securities Limited. As a consequence of being struck off the assets of the company, including its rights under the lease, became bona vacantia and passed to the Crown. The Crown disclaimed the company's rights to the lease and, consequently, the tenant's rights became completely ownerless. Subsequent to this the company filed the required accounts and applied to the court to be restored to the register. Once restored the company then applied to the court to request that the lease be continued as if there had been no interruption of it. The court of first instance held that the landlord was not bound to continue the lease. The company then appealed to the Inner House of the Court of Session. The Inner House refused the appeal and determined that the company's right to the lease ended on the date of the Crown's disclaimer and that the landlord was not bound to continue the lease. The court held that if the KLTR disclaims the property of a dissolved company it has two important effects:

• First, as from the date of the disclaimer, the rights, interests and liabilities of the company, and the property of the company, in or in respect of the property disclaimed are specifically brought to an end.

• Secondly, that property is deemed not to have vested in the Crown.

In other words, the property at that stage is neither the company’s nor the Crown’s. As noted above, however, the court also determined that interested third parties – for example, a creditor – would still be entitled to apply to the court to have the asset transferred to them.

In contrast in Mistral Asset Finance Limited v Registrar of Companies [2020] EWHC 3027 the English High Court decided not to follow ELB Securities when presented with a similar case concerning a dissolved company that had been restored to the register and the right of that company to continue a lease following the Crown's disclaimer of it. In Mistral Asset Finance the English High Court held that it is settled law in England and Wales that a statutory disclaimer of land deemed bona vacantia does not, in itself, survive the restoration of a dissolved company. Recognising that this was in stark contrast to the position settled by the Inner House in Scotland, the court noted that the Companies Act 2006 regime in relation to the effect of a Crown disclaimer differs as between England and Wales and Scotland.

These two cases relate specifically to leasehold interests and it remains unclear the extent to which the position differs north and south of the border in relation to other bona vacantia property, including shares.

For a fuller consideration of the potential effect of disclaimer in the context of leasehold interests held by a company that is struck-off the register - please see Brodies' earlier insight article here.

How Brodies can help?

If you are seeking to restore a company to the public register or are dealing with the bona vacantia assets of a dissolved company, shares or otherwise, and require some assistance please get in touch with the Brodies Corporate Team.