Where a receiver is appointed over a company’s assets the company must show this on its business stationery. The Companies Registration Office’s public records will reflect the appointment of the receiver. These laws apply even if the company does not own the property personally but holds it for someone else, such as where the company is a professional trustee company.
Independent Trustee Company Limited v Registrar of Companies (January 2015, High Court) confirms that professional trust companies continue to be at risk of being designated as having a receiver appointed to part or all of their assets where a receiver is appointed to a client pension fund’s assets.
The pension fund had borrowed money to buy a property. When the loan to value condition of the borrowing was breached the lender exercised its right to appoint a receiver over the property to enable it be sold and the proceeds repaid to the lender.
The plaintiff trust company (ITC) sought an injunction preventing the registrar of companies from altering the status of ITC on its register from being normal to having had a receiver appointed. ITC also asked the court to rule that other laws which apply to a company when a receiver is appointed over its assets, such as the requirement to note the appointment on business stationery and invoices, did not apply to ITC as it did not beneficially own the property.
It explained that publication of details of the appointment of the receiver had caused such concern to its clients and those with which it did business that it had to issue corrective statements both to its creditors and in the press.
It appears from the judgment that the Registrar’s processes to record the appointment of a receiver over a company’s assets have been altered as a result of ITC’s protests to the Companies Registration Office (CRO). Details of the appointment of a receiver over a company’s assets in the CRO’s records now note that the property may or may not be beneficially owned by the company and the person inspecting the register is referred to the specifics of the relevant form filed in the CRO for further information.
The court held that the statutory provisions at issue could not be construed as only applying to receivers appointed in a certain limited category of circumstances. The rafters of the legislation would have appreciated the distinction between legal and equitable interests and had they intended the law to operate in the manner outlined by the plaintiff they could have worded it on that basis. The plaintiff’s action was dismissed.
The fact that ITC’s accounts were unaffected by this transaction as it had no beneficial interest in the property was held by the court not to be relevant.
Many professional corporate trustees may find themselves at a similar disadvantage where client pension funds are in equivalent difficulties.
The new company law regime in the Companies Act 2014 does not appear to afford any relief from the position that ITC found itself in.
The solution to such issues may be, with lender consent (which may or may not be easy to secure), to transfer leveraged property to a nominee which would presumably face similar challenges but the business issues affecting the corporate trustee may be somewhat less, should the nominee company have a neutral name unrelated to the trust company.
The High Court has not had the last word in this matter as its decision is being appealed.