The Myth of Company Restoration

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Many have questioned about what would be the best and cost effective solution when their company is being dissolved or struck off from the Companies House register. But one question almost thought by every single individual in this case – Why should I restore my company when I can form a new company instead.

There are different options when a company is dissolved and to incorporate a new company may seem to be the cheapest solution on the outset. However, there is a number of factors should be taking into consideration before making a decision as to incorporate a new company and abandon the existing dissolved company.

In general, if a company was struck off or dissolved by the Companies House against the wishes of its members then usually the purpose of the company restoration is to continue business trading. Other typical reasons to carry out the company restoration could be to realize assets for the shareholders, pursue an injury claim against third parties, pension funds or to complete property or business transaction when was agreed before the dissolution.

Contrary to the popular myth of the incorporation of a new company with the same name as the dissolved company is not considered to be an alternative to restoration of a company and certainly not to be considered by the Companies House Registrar as the same legal entity.

In the eyes of the law and other business organizations, the newly incorporated company will be a different company which is exactly why there is a new company registration process involved. Albeit the new company incorporation is faster and perhaps cheaper, the assets owned by the dissolved company will still remain beyond reach as it is confiscated by the Crown Bona Vacantia, unless the required company restoration procedure is followed to reinstate the dissolved company on the Companies House Register.

It is worthwhile to note that anyone trades with a dissolved company or a company director who carries on trading when the company is dissolved prior to a completed company restoration process to the Companies House Register there can lead to a number of serious legal repercussions, namely personal liability for company debts and other ancillary legal issues. A company director caught himself in the situation where carried any business transaction is likely to be found liable for fraudulent trading and subject to both civil and criminal sanctions.

The vast majority of company restorations are straightforward. The unlikely event where the company restoration may encounter difficulties would be a third party may oppose to the company restoration but the applicants will be duly informed of any adverse events by the authority.

The Law and Legal Procedures for the Company Administrative restoration

From 1st October 2006 the Companies Act 2006 introduce a new provision for the company restoration of a dissolved company in certain circumstances. Section 1024 of the CA 2006 allows for a company administrative restoration procedure, which serves as a supplement to the existing Court power to restore companies. This is particularly beneficial for company owners as it means that the company owners can avoid the high legal cost to restoration and to restore the company at a lower cost. This section grants the Companies House the legal authority to restore a dissolved company to its company register. The Court power to restore a dissolved company will be reserved for limited cases where the Companies House Registrar lacks of the legal authority to act.

To thrive, the key benefits of an administrative restoration would be that it is quicker application process and hence lower cost as there is no need to resolve the issue via the courts. If the purpose of a company restoration is purely to release funds (by bona vacantia) amounting to less than £3,000 in cash it is not always necessary to issue proceedings to restore a Company. Nonetheless, each company restoration case will be decided on its own merit and is solely at the discretion of the Treasury Solicitor.

Further to note that a company director, shareholder and creditor of a dissolved company may apply for a company restoration within 6 years of the company dissolution. Any cases outside the 6 years period will need to apply for a company restoration through the traditional court route. If the dissolution was made voluntary then the person who submitted the original application to dissolve the company may apply for an administrative restoration under the CA 2006.

The Company Administrative Restoration for a dissolved company can be used where the company was struck off after 1st October 2009 and it should be under the following circumstances:

• the company was carrying on business / or in operation at the time of dissolution
• the company has been struck off under sections 1000 or 1001 (power of registrar to strike off a company)
• the application is made within a period of 6 years after the date of dissolution
• the Crown has signified consent
• the company has delivered all the necessary documents to bring the company up to date, i.e. all outstanding documents at the time of dissolution and any that have fallen due during the period of dissolution, and paid any relevant penalties under section 453 or corresponding earlier provisions (civil penalty for failure to deliver accounts) that were outstanding at the date of dissolution or striking off.

The general effect of a successful administrative restoration is that the company is deemed to have continued in existence as if it had not been dissolved or struck off the register and the Bona Vacantia will release the fund upon the Companies House notification of completion.

To sum up the article on the company administrative restoration procedure, there are 3 important questions to bear in mind before proceed with the company restoration:

(i).Is the purpose of the company restoration to continue trading?

(ii).Was the company struck off within the last 6 years?

(iii).Whether the company accounts are filed up-to-date, depending on late filing penalties and other business consideration that you may have (such as to reclaimed the business funds which was confiscated by the Bona Vacantia due to company dissolution), an administrative restoration may be advisable.

For more information or to seek business advices for your company, please contact us on 02033978776 or send us an enquiry via – info@archerscs.co.uk Our associates will response to your enquiry as soon as possible.