Earlier this autumn, it was reported that Pink Floyd member Dave Gilmour is struggling to sell his £10 million mansion for an unusual reason - it isn't his.
Originally purchased through his former company, that company was then struck off but ownership was not transferred - leading to it becoming 'vacant goods', and the property of the Crown. In this article, legal assistant Oliver Ward explores this phenomenon, outlining how a strike off should be approached and the potential pitfalls.
Background to a strike off
A company itself can apply for the company to be struck off from the register of companies through a voluntary strike off under section 1003 to 1011 of the Companies Act 2006 (CA 06). A company may apply for strike off for a number of reasons. The business and assets of a company might have been transferred to another company within the same group rendering the first company redundant or following a restructuring, the company might no longer be required in the group.
Under section 1000 or 1001 of the CA 06, the registrar of companies also has the power to strike off a company which it believes is not carrying on a business or in operation. The registrar of companies will send a communication to the company asking whether it is carrying on a business or in operation. If it does not receive a reply within 14 days from the company that it is carrying on a business or in operation, a second communication will be sent stating that a notice will be published in the Gazette to strike off the company within 14 days of the date of the notice. If no response is received, the company is struck off from the register at the expiration of the period.
The need to review all assets before strike off
Due care and consideration is required before deciding to voluntarily strike a company from the register. The same applies for deciding to actively not to respond to the notices received by the registrar of companies.
A key focus is ensuring that all the company’s assets have been dealt with in the appropriate manner prior to the strike-off – if the company still has assets at the time of strike off, a future desire to deal with these assets can prove problematic and costly.
Pink Floyd legend Dave Gilmour has experienced the pitfalls of a company being struck off which still has assets. When attempting to sell his £10 million mansion, Gilmour discovered he does not actually legally own the asset. The mansion in East Sussex was purchased in 2011 by Gilmour through his former company Hoveco Ltd, a company of which Gilmour was the sole director. On the 14th October 2014, the company was struck off from the register.
At the time of strike off, the title to the mansion had not legally been transferred from Hoveco Ltd to the Pink Floyd star due to a mere administration oversight. Therefore, the legal title to the asset remained owned by Hoveco Ltd.
Assets remaining in a company after a strike off automatically pass to the Crown under the legal doctrine of “Bona Vacantia” (property without owner). The asset remaining in a company after strike off becomes owned by either the Duchy of Lancaster or the Duchy of Cornwall, depending on the location of the company’s registered office before dissolution.
Gilmour discovered that the title to the property does not belong to him but instead to the Crown – despite him living in the property for years. Following the revelation, Gilmour has been unable to dispose of the property and has had to turn to seek action in the High Court.
Solutions to acquire the asset
A director or shareholder of a company struck off from the register can apply to the registrar of companies to restore the company to the register provided that the company was trading at the time it was struck off and the application for restoration is made within 6 years of strike off. Once the company is restored to the register, the asset is once again owned by the company and can be dealt with appropriately – provided that the Duchies have not already disposed of the asset.
However, this option is not available for a company which has been voluntary struck off from the register – it is only available when the registrar of companies has struck the company off under section 1000 or 1001 of the CA 06. Still, this option was not available to Gilmour – although the company was struck off through compulsory strike off, the 6-year period had elapsed.
Alternatively, a former director or shareholder can apply to purchase the asset from the Duchies. This does not restore the company to the register but merely allows the company to purchase the asset for open market value. Yet, the Duchies have discretion how to dispose of an asset and will do so in the most cost-effective manner. Purchasing the asset from the Duchies can prove costly; the applier is required to pay the legal fees – to purchase land costs nearly £1,000 plus VAT on fees alone.
Finally, a court order to restore the company can be sort. An application to the court is required, alongside a part 8 claim form and a witness statement. Information such as balance sheet outlining the company’s financial position at the time of dissolution is also required. Again, provided that the Duchies have not already disposed of the asset, at the time of restoration the company will hold the asset and it can then be dealt with appropriately. Nevertheless, this can be a costly and extensive process sometimes taking up to just under a year from start to finish.
Conclusion
Thus, the assets of a company must all be dealt with appropriately prior to the dissolution of the company. Failure to do so can prove burdensome and can be a timely as well as costly oversight. The process to deal with assets following a company’s strike off is not straightforward.
Oliver Ward is a legal assistant in the corporate and commercial team.
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