The High Court has given some guidance on the effect of an order to restore a dissolved company to the register where a secured creditor has rights against that company and there has been a disclaimer by the Crown.
A real estate development company was dissolved after having had LPA Receivers and administrators appointed by a bank which held security from the company. After dissolution – occasioned by the administrators filing their final report – the LPA receivers continued to negotiate a potential lease of the relevant property with a view to its eventual sale.
Notwithstanding the disclaimer by the Crown technically terminated the freehold interest (by the ancient doctrine of escheat the land would still be held by the Crown) the register at the Land Registry continued to show an entry for the land albeit noting the disclaimer.
The secured creditor applied to have the company restored to the register.
An order was made restoring the company to the register. The key issue was what that meant for the land where there had been a disclaimer by the Crown. The judge decided that the effect of the order was to retrospectively re-create and revest in the company the freehold interest as if it had never been dissolved. The Court also suggested that a mortgagee’s remedies continued to be exercisable notwithstanding the dissolution of the chargor company. The possibility of the bank making an application under section 1017(2) Companies Act 2006 to have the freehold vested in it was also discussed.
Increasingly with the use of SPVs a secured creditor can be faced with the dissolution of its borrower or security provider. This case gives useful guidance of the different routes available to such a creditor to solve any problems this situation may give rise to.