Getting money from a dissolved company is like getting blood out of a stone – without the stone. Associate Victoria Leslie and solicitor Andrew Stott, of Ledingham Chalmers LLP Inverness, suggest there is a way of getting something out of nothing.
“When a company is dissolved it effectively ceases to exist as a legal entity and any assets held before the date of dissolution are transferred to the Crown,” says Andrew Stott, “Nothing is left behind, causing problems for unpaid creditors.
“All is not lost for a third party creditor as it can, subject to certain conditions, apply to the court to have the company restored to the register.
“Assets that had been transferred to the Crown are then automatically, without further application, returned to the debtor company. Once restored, there is a legal entity to pursue – and if assets have been returned by the Crown, suing the company may then be worthwhile.
“Those with an interest in land in respect of which the former company also had an interest can make an application as well. This could be the only way in which certain land related deals in which the former company was involved can be completed.”
While an application seeking restoration may be competent, it may not always be a practical remedy – for either creditors or company directors of the failed firm.
“Restoration is only the first step for a creditor, Formal COL proceedings will likely follow to seek recovery of the debt,” says Victoria Leslie.
“Unless there are significant assets, the cost benefit of restoration is unlikely to be worthwhile.”
Directors or employees of a dissolved company may also take advantage of the company restoration process.
“Historical debts guaranteed by the directors are left exposed with no relief from the company itself, Restoration enables recourse the company’s assets by such directors seeking to exercise the right of relief against guarantee payments,” says Mr Stott.
“Likewise an individual suffering from an injury sustained during employment with a now dissolved company has no right of claim unless it is restored.”