Where a company has been wound-up, directors are no longer officers of the company and any transactions they enter into will be void.
This was recently affirmed by the High Court in Park Associated Developments Ltd v Kinnear and another. The defendants were directors of the claimant which owned 12 plots of development land. The claimant was wound up but two months later the defendants purported, as director and company secretary of the claimant, to execute property transfers transferring two plots to each of them.
The consideration was said to be £190,000 per pair of plots. The only evidence of the claimant receiving any benefit for the transfers was the discharge of charges on those plots in the sum of £57,000 per plot. The defendants were then registered as legal proprietors. One plot was later sold for £200,000. Two properties were rented out.
The liquidators of the claimant sought re-transfer of the properties, or rectification of the registers, as well as recovery of the sale proceeds and rental income. The defendants argued that the company had not been in liquidation at the time of the transfers.
The High Court held there was evidence that the order for winding-up had been made before the transfers had taken place. The claimant therefore retained beneficial ownership of the properties. Alternatively, rectification of the register could be ordered as the defendants had, as a minimum, caused or contributed to the mistaken registration by lack of proper care.
The defendants should have been aware of the company's affairs. The director had known of the winding-up application and could be expected to ensure that he knew what had transpired. The title register would be rectified to show the claimant as proprietor. The sale proceeds of the one plot (plus interest) were to be paid to the claimant and the rent could be recovered. Consideration should be given to providing credit to the defendants for the sums used to discharge the charges on the properties and for completing the development.
Things to consider
No trial judge would have accepted that the directors believed the winding-up had not taken place without taking steps to determine if that were so or not. Had they taken such steps, they would have discovered the company had been wound up and that they had no right to deal with its assets. Their lack of proper care was no defence.