The Registrar of Companies (the Registrar) has the power pursuant to the Companies (Guernsey) Law, 2008 (the Companies Law) to strike off companies which are either defunct or defaulting.
Defunct companies are those which the Registrar has reasonable cause to believe are not carrying on business or are not in operation or, in the case of a company which is being wound up, the Registrar has reasonable cause to believe that no liquidator is acting or that the affairs of the company are fully wound up.
Defaulting companies are those companies:
- which fail to deliver to the Registrar an annual validation in accordance with the Companies Law before the end of January in any year;
- about which the Registrar receives notice from a corporate service provider stating that the registered office of the company is ineffective;
- about which the Registrar is of the opinion that there have been persistent or gross contraventions of the Companies Law; and
- which fail to comply with the provisions of the Companies Law in relation to the requirement to have a resident agent.
A company may also be voluntarily struck off following an application by the company to the Registrar and upon such striking off, the company will be dissolved.
Where a company is struck off under the above provisions of the Companies Law, all property and rights then vested in it or held on trust for it (but not property held by it on trust for another person) will, unless Her Majesty's Receiver-General directs otherwise, become bona vacantia belonging to the Crown.
A company which has been struck off can, in certain circumstances, be restored to the Register of Companies (the Register) provided that any application to restore a company to the Register is made within ten years beginning on the date the company was struck off or, as the case may be, dissolved and removed from the Register. However, companies which, in the opinion of the Registrar, have been persistently or grossly contravening the Companies Law may not apply to be restored to the Register.
There are two methods by which a company can be restored to the Register. The first method is by application to the Royal Court and the second method is by application to the Registrar.
Application to the Royal Court
The following persons may apply to the Court for an order restoring a company to the Register:
- a company which has been struck off as a result of being defunct, defaulting or voluntarily struck off the Register (as noted above);
- a company which has been dissolved and removed from the Register having been voluntarily or compulsorily wound up;
- any director, member or creditor of the company;
- any liquidator, administrator or, in the case of a protected cell company, the receiver of a cell;
- the Guernsey Financial Services Commission (the Commission) in respect of a supervised company or a company engaged in financial services business; or
- any other person appearing to the Court to have a sufficient interest in making the application.
Notice of the application to the Court (which is published by the Registrar on the Guernsey Registry website) must be served on the following persons in order to give them an opportunity to make representations before the Court makes an order for the restoration of the company:
- the Registrar;
- the Commission in respect of a supervised company or a company engaged in financial services business;
- Her Majesty's Procureur;
- Her Majesty's Receiver-General; and
- any liquidator, administrator or, in the case of a protected cell company, receiver of a cell.
The Court may also consider representations from such other persons including any member, creditor or director of the company and any liquidator, administrator or, in the case of a protected cell company, receiver of a cell.
In practice, once notice is served, each of the Registrar, the Commission, Her Majesty's Procureur and Her Majesty's Receiver-General will provide written confirmation to the applicant confirming it has no objection to the restoration. A copy of this confirmation is then provided to the Court in the application in satisfaction of the above requirement.
The Court may order the company to be restored to the Register (the Order) if it is satisfied that:
- in the case of a company which was defunct, defaulting or voluntarily struck off, at the time of its striking off, the company was carrying on business or in operation; or
- it would be just for the company to be restored to the Register.
In reaching its decision, the Court will consider the following matters:
- whether or not the company would satisfy the solvency test, if restored (unless the application is made by a creditor).
In order to satisfy the solvency test a company must be able to pay its debts as they become due and the value of the company's assets must be greater than the value of its liabilities. In determining whether the value of a company's assets is greater than the value of its liabilities, the directors must have regard to the most recent accounts of the company and all other circumstances that the directors know or ought to know affect or may affect the value of the company's assets and the value of the company's liabilities. The directors may also rely on valuations of assets or estimates of liabilities that are reasonable in the circumstances;
- whether the persons who were directors at the time the company was struck off consent to being directors if the company is restored;
- in the case of a company which has been dissolved having been voluntarily or compulsorily wound up, whether any person who was a liquidator prior to the company's dissolution consents to be a liquidator, if the company is restored;
- the circumstances in which the company was struck off or dissolved;
- whether there were any persistent or gross violations of the Companies Law;
- whether the company was used for fraudulent purposes;
- whether restoration to the Register would jeopardise the reputation of the Bailiwick as a financial centre; and
- whether it would be just and equitable to restore the company to the Register.
The Order may be made on such terms and conditions, contain such directions and make such provision as the Court thinks fit for placing the company and all other persons in the same position as nearly as may have been if the company had not been struck off or dissolved.
The Order may require any person responsible for the company being struck off or dissolved to pay the costs of the application for restoration and require those persons to reimburse the applicant for any payments made to the Registrar and Her Majesty's Procureur (below) even if that person is not a party to the application for restoration.
Commencement of the Order
Upon an Order being made and taking effect, the company will be deemed to have continued in existence, upon restoration of the company's name to the Register.
If the name of the company is restored to the Register before the expiration of six years from the date of its striking off or, as the case may be, dissolution and removal from the Register, it is entitled to have returned to it any property which vested in the Crown (bona vacantia) upon its striking off or dissolution and removal from the Register or, if any such property has been disposed of, its value at the time of disposal.
This six year period may be extended if the Court considers it equitable to do so having regard to the extent of prejudice the company would otherwise suffer.
Payments and Fees
Restoration of a company is conditional upon payment by the applicant of:
- a restoration fee payable to the Registrar in addition to all fees, penalties etc. which would have been payable by the company if it had not been struck off or dissolved and had each year delivered its annual validation in accordance with the Companies Law (including late filing fees for annual validations);
- any additional fees specified by the Registrar;
- any costs incurred by Her Majesty's Receiver-General in administering any property belonging to the company; and
- any costs incurred by Her Majesty's Procureur in connection with the striking off, dissolution or the application for restoration.
In addition, there will be Court fees for making the application as well as notarial fees for swearing the affidavit.
If a company was, prior to being struck off or dissolved, declared exempt from tax (Note: the requirement to pay exempt fee was abolished from 2008 onwards), it will be required to pay any outstanding exempt fees or, if it does not wish to pay these fees, it will be subject to an audit by the Administrator of Guernsey Income Tax.
Application to the Registrar
Applications to restore a company are usually through a court process, as noted above. However the Companies Law permits the Registrar to restore to the Register defunct, defaulting or companies which have been voluntarily struck off, whether of his own motion or at the request of the company or any director, member or creditor provided that the he is satisfied that:
- the company was struck off in error, be it on the part of the Registrar, the company, any of its directors or any other person; or
- the company was struck off in circumstances in which it should not have been; or
- all the grounds, circumstances or defaults resulting in the company being struck off no longer exist or have been remedied and all specified payments, ie those of the Registrar, Her Majesty's Procureur and Her Majesty's Receiver-General (above) and any other fees, penalties and amounts due, have been paid, subject to prior consultation with Her Majesty's Procureur, Her Majesty's Receiver-General and, in the case of a supervised company, the Commission.
In addition, the Registrar must be satisfied that:
- an application to the Court for the restoration of the company would be successful but is not necessary for the fair disposal of the matter; and
- the restoration of the company would not prejudice any creditor or third party.
Given the requirement of (a), an application to the Registrar needs to cover all matters that would otherwise have been addressed on an application to the Court, for example satisfying the solvency test.
Changes to the Companies Law
Certain provisions of the Companies Law relating to company restorations have recently been amended.
Previously, the Registrar had very limited discretion to restore a company to the Register in that it only extended to where the error arose on his part, for example, in circumstances where he did not follow the correct procedure under the Companies Law. This has since been extended to include errors which arose not only on the part of the Registrar, but those of the company, its directors or any other person, for example a corporate services provider. The Registrar's discretion may therefore extend to a company which was struck off for non-compliance having failed to submit its annual validation or change of registered office filings on time as a result of an administrative error.
The Registrar may also now consider an application for restoration if he is satisfied that all the grounds, circumstances or defaults resulting in the company's striking off no longer exist or have been remedied and all specified payments, penalties and amounts due have been paid. This power of restoration however remains subject to the same conditions that the Registrar is satisfied that an application to Court would be successful but is not necessary for the fair disposal of the matter and that no creditor or third party would suffer any prejudice. The Registrar is however required to consult Her Majesty's Procureur, Her Majesty's Receiver-General and, in the case of a supervised company, the Commission beforehand.
Finally, explicit provision has been made to permit companies that have been compulsorily or voluntarily wound up, dissolved and removed from the Register to be restored as there are occasions where it is appropriate to do so, for example to deal with an asset which was unknown to the liquidator at the time of the winding-up and dissolution of the company. However such applications must be made to the Court seeking an order for restoration to the Register.
It remains to be seen whether such applications will be readily granted and whether these amendments to the Companies Law create greater flexibility or, as feared by some, greater uncertainty and potential scope for litigation in respect of companies whose affairs have already been wound up.