Carey Olsen’s restructuring and insolvency team has succeeded in applying to the Royal Court for the restoration of K2 Insurance Limited (“K2”), a liquidated and dissolved company, enabling the company to subsequently recover a substantial asset. Advocate David Jones and Associate Harry Stirk acted for Ian Damarell of BDO Limited, the liquidator of K2.
K2 was as a captive insurance company ultimately owned by G4S plc, for which it wrote insurance policies. Following a group reorganisation, it was decided that K2 was no longer needed and should be voluntarily liquidated on a solvent basis. K2 was removed from the Register of Companies on 29 September 2010, but in 2012 it was discovered that K2 had overpaid for certain insurance premiums and was owed a substantial refund from its reinsurer. The reinsurer could only make repayment to K2 which, technically had ceased to exist at the date of its dissolution. It was therefore necessary to restore K2 to the Register of Companies so that it could receive the repayment and distribute it, before being dissolved again.
Detailed evidence was presented to the Royal Court in relation to the chronology of events leading up to K2’s dissolution and its entitlement to repayment. Careful consideration was also given to reappointing K2’s former liquidator and devising a mechanism by which the repayment could be received, processed and subsequently distributed to K2’s members.
Advocate Jones persuaded the Royal Court that it was just to restore K2 and to reappoint Mr Damarell as its liquidator.
The case is of interest because it is one of the very first of its kind in Guernsey; previously, it was not possible in Guernsey to restore a company that had been dissolved following liquidation, whilst it was possible to restore a company that had been struck-off as a result of administrative failings or voluntarily.
The Companies (Guernsey) Law, 2008 (Amendment) Ordinance 2014, which came into force on 2 November 2014, changed the position.
There is some debate around this development in Guernsey’s company law legislation. For some time, insolvency office holders had understandably sought its introduction to cover situations akin to the one above where assets are discovered post-dissolution. The change in the law allows the restoration of a company up to ten years after its dissolution.
Conversely, the new provisions have removed the finality that was previously associated with the winding up process.
Advocate Jones commented: “This case was the perfect example of the benefits of the latest changes to the legislation. The liquidator diligently performed his role prior to dissolution. When new assets came to light he was enabled to return further value to the former members of K2 by restoring it.
“In light of the ability to restore dissolved companies, it is now more important than ever for companies to ensure that they conduct the winding up process thoroughly and that they consider utilising the services of experienced professional advisors.”