A practical guide to Freezing Orders (Part 2) by Ian Coupland, Head of Commercial and Litigation, Lewis Nedas Law.
We have all read in the press about people being “served” with a Court Order. If the order is a freezing injunction, you will probably find that:
And all of this carries with it the threat of being imprisoned for contempt of court (i.e. disobedience to an order of the Court).
If you have the misfortune to be on the receiving end of the legal broadside that is a freezing order, the likelihood is that the Order itself will be many pages long, and that it will have been “served” – legal jargon for being formally delivered to you – with hundreds, and maybe thousands, of pages of evidence and exhibited documents. You need expert legal advice – and fast.
We at Lewis Nedas Law have many years’ experience of acting for clients who have had injunctions, including freezing orders, made against them. We can assist with ensuring:
We can advise whether it is worth trying to get such an order removed.
(We also obtain injunctions for our clients – see our Practical Guide Part 1 here)
A freezing Order is a form of injunction made by the Court to prevent a Defendant (which includes companies, employees and those acting on behalf of a Defendant) from hiding, removing, disposing of, or even merely dealing with, their assets. The objective is to prevent the person injuncted from creating a situation where, following a judgment in the Claimant’s favour at the end of the case, no money or assets are available (or none that can be found) to meet the Claimant‘s claims.
A freezing order may be of two broad types: (1) where the Claimant is claiming their own property, such as where the Claimant says that the Defendant has possession of the Claimant’s money (for example, where the Defendant is responsible for the money being taken, or perhaps it has been paid by an associate of the Defendant); and (2) where the Claimant believes that the Defendant may dispose of or conceal assets to defeat a judgment, and the Court freezes assets up to a value sufficient to satisfy the Claimant’s claim and estimated legal costs, so that, after a money judgment has been obtained, the frozen assets may be used to satisfy it.
The freezing injunction must contain a maximum amount so that assets over that particular threshold are not frozen.
This depends on the terms of the Order that was actually made. Normally, the order defines “the Defendant’s assets” as assets whether or not they are in the Defendant’s own name, and whether they are solely or jointly owned. They include any asset which the Defendant has the power, directly or indirectly, to dispose of or deal with as if it were his own, and a person is regarded as having such power if a third party holds or controls the asset in accordance with his direct or indirect instructions.
Because everyone’s personal situation is different, it is frequently the case that there may be doubts about whether a particular asset is caught by the order. We can assist a person who has had an order made against them to decide whether an asset is frozen or not.
The normal form of Freezing Order restrains only assets within England and Wales. An extended form of freezing injunction (for which additional safeguards apply) may be made in respect of assets whether they are in or outside England and Wales.
Freezing Orders always contain so-called “ancillary orders” designed to make the primary order more effective. The most usual one of these requires the person injuncted – often within 48 hours of service of the order to inform the Claimant’s solicitors of all his assets whether in his own name or not and whether solely or jointly owned, giving the value, location and details of all such assets.
Usually this requirement is subject to a minimum value per item in order to avoid listing items such as household furniture or bicycles, which are not the sort of assets that the Claimant is likely to be interested in.
The Order then usually requires the person injuncted to produce an affidavit (which is written testimony sworn as true) verifying the disclosure made, and producing evidence such as supporting bank statements. There is a set time for compliance with this, which is usually a matter of days.
Because the Order contains statements such as that “Wrongful refusal to provide the information is contempt of court and may render the Respondent liable to be imprisoned, fined or have his assets seized” it is important that anyone who receives such an order takes proper advice on their compliance obligations.
In the USA, the right against self-incrimination is enshrined in the 5th Amendment to the Constitution. In England, it is (perhaps strangely) referred to as the “privilege against self-incrimination.”
In the standard form of freezing injunction, this privilege is worded as: “If the provision of any of this information is likely to incriminate the [person injuncted], he may be entitled to refuse to provide it, but is recommended to take legal advice before refusing to provide the information.”
The principle is that a person cannot be forced to give evidence which may tend to show that he has been guilty of criminal conduct. Using it, then, can be considered to be a double-edged sword, for whilst reliance on it may avoid the disclosure of information, it is also an admission of involvement in criminal conduct, which does not necessarily assist in persuading the Court on a subsequent occasion that the person injuncted has no liability in respect of the conduct which led to the making of the injunction.
The occasions when it is appropriate to rely on the privilege against self-incrimination are very rare.
The standard form of freezing order contains provisions which allow the person who has been injuncted to have access to ordinary living and business expenses and also a reasonable sum for legal advice and representation. However, the amounts originally permitted are often far lower than the actual amounts spent each week, and it will often be necessary to obtain the Claimant’s agreement or a further Court order increasing the amounts.
Furthermore, the order does not prohibit dealing with or disposing of assets “in the ordinary and proper course of business.” This is designed not to close down a business which has its normal costs such as rent or salaries to be met.
Every freezing injunction has a provision in it allowing anyone affected by it to apply to the Court at any time to vary or discharge the Order (or so much of it as affects that person). This includes the person who has been made the subject of the injunction.
Before making such an application, that person must first inform the Claimant’s solicitors. If any evidence is to be relied upon in support of the application, the substance of it must be communicated in writing to the Claimant’s solicitors in advance.
The right to apply to set aside (i.e. undo the making of) an Order can be deployed in more circumstances than if the Claimant has obtained an injunction against completely the wrong person (for example, the wrong John Smith). When applying for an injunction, a Claimant must make what is called “full and frank disclosure” of material facts which may make the Court doubt that it is right to grant an injunction. If the Claimant has provided written evidence which is incomplete or which materially misstates the facts, then the person injuncted can go back to the Court and ask for the order to be discharged.
There are other grounds for seeking to set aside such an order once made. At Lewis Nedas, we can advise if such grounds exist, and how to make the best use of them.
A freezing injunction is normally applied for in the absence of the Defendant, and if granted, lasts for a short period such as one week. The Claimant then has to return to the Court (the so-called “Return Date”) to obtain the continuation of the injunction.
This is the Defendant’s chance to seek to obtain changes to the Order, or to seek its discharge. However, the complexity of the case may require a longer period than one week to prepare for such an application, and tactical decisions may need to be made as to how to proceed. For example, it is often better to agree to delay the Return Date (meaning that the injunction continues for a short further period before the case comes back before the court) in order to have more time to prepare to resist the longer-term continuation or its terms, or to ready an application to set aside in whole or in part.
We are experienced in helping clients with those decisions.
We are not going to pretend that resisting the continuation of an injunction, or applying to set aside, is cheap. It is only worthwhile when there is a serious dispute and a lot of money at stake.
Why are we saying this? It is because we do not want to waste your time or ours.
We will always provide you with estimates of the likely legal costs going forward. Like filling a car with petrol before going on a trip, our business model works on the basis that each stage is pre-funded: we hold the funds in our client account on your behalf until they are needed. In this way, our clients can keep track of their ongoing expenditure.
Whilst, as mentioned above, the Order allows for expenditure on legal costs, there can nevertheless be difficulties where the Claimant alleges that all the frozen assets belong to them. In such a case, it will usually be necessary to borrow the funds from elsewhere.
At Lewis Nedas Law, you can rely on us to do a proper job at reasonable cost. We have the experience, but we do not have City of London overheads or steep hourly rates. Above all, we want to understand your commercial objectives, and will do our best to achieve them. We work closely with exceptional Counsel as appropriate.
We do not rack up legal costs willy-nilly. We are aware that legal costs are a burden, and we are keen to keep our charges to as low a level as can reasonably be achieved. We will guide you as to the most effective ways of enabling us to give you the best service we can, whilst also keeping our fees down.
You can rely on Lewis Nedas to tell you if your case has problems which make it desirable to negotiate a settlement with your opponents.
This article is intended to be no more than a general guide, and does not comprise legal advice. You are strongly advised to take legal advice before making or resisting any application to the Court.
For legal advice and assistance please contact Ian Coupland, Head of Commercial and Litigation, Lewis Nedas Law on 02073872032 or icoupland@lewisnedas.co.uk
A practical guide to Freezing Orders (Part 1) by Ian Coupland, Head of Commercial and Litigation, Lewis Nedas Law.
It is everyone’s concern: you are owed a large sum of money, and the person or company who owes you the money (the debtor) seems to be putting their money offshore or hiding it away. Maybe they are selling their house. What if they transfer their money with a mouse-click and disappear? How will you be paid then?
This is a worrying scenario for any creditor.
But – if you move fast – all is not lost. One of the law’s most powerful weapons is the freezing injunction: the court is able to “freeze” an individual or corporate debtor’s assets, so that they cannot readily be dealt with or disposed of. The freezing order preserves the assets so that the creditor has the chance to take court proceedings and obtain judgment, and so that the debtor’s assets remain available as a target for enforcement of a judgment.
We at Lewis Nedas have many years’ experience of obtaining injunctions, including freezing orders, for our clients (and also in acting for clients who are on the receiving end of such orders – to be considered in a subsequent article).
The first requirement is that, whilst the claimant applying for such an order cannot (of course) guarantee that they will succeed in their claim, they must be able to explain on what basis they expect to recover judgment. Court proceedings must be prepared by a barrister (referred to as “Counsel” who will present the application to the Court) and the claimant must promise to pursue the proceedings. The claimant must show that they have a “good arguable case” in relation to the dispute.
Second, the claimant must provide some evidence that the defendant has assets in England and Wales. This may be land and property, a bank account, shares, or assets. The need is to show the court that there is something on which the freezing order can bite.
Third, the claimant needs to satisfy the Court that there is a real risk that the defendant (or people acting as the defendant’s agent, or on the defendant’s instructions) may hide or dispose of their assets so that it becomes much harder for the claimant, having obtained judgment, to actually get paid. (The Court may give a judgment ordering the debtor to pay the creditor say £1 million, but if the debtor does not pay, the creditor must “enforce” against the debtor’s assets. This means getting a court order allowing the creditor to take and sell the debtor’s assets to realise money to pay the creditor’s judgment debt and costs.) There needs to be evidence of facts from which the Court can infer that the defendant is likely to move assets or improperly dispose of them: unsupported assertions, or mere expressions of fear, will not persuade the Court.
Fourth, the court must be satisfied that it is just and convenient in all the circumstances of the case to grant the freezing order.
Fifth, the claimant must solemnly promise (“undertake to the Court”) that if the freezing order turns out to have been wrongly obtained or to cause loss which the Court considers should be compensated, then the claimant will pay such sums. Normally, the claimant must tell the Court what assets are available to underlie the undertaking.
Sixth, the claimant must be open with the Court about the weaknesses in their case, or if there are reasons which might make the Court less likely to make the order. This is the so-called duty of full and frank disclosure.
Obtaining the freezing order usually involves a few days of intense work by solicitors and Counsel, and culminates in a hearing presented by Counsel before a senior level (High Court) Judge. The Judge normally needs to be persuaded that the facts of the individual case justify the making of a freezing order.
On the first hearing of an application for an injunction, the judgment will normally make an Order which lasts for one week. The Order must then be communicated to the Defendant, and also to those such as banks, who are known to hold the Defendant’s assets. During this period, the Defendant is normally required to disclose the nature and location of their assets.
A further hearing is then held, at which the claimant asks for the injunction to be continued, and the Defendant may (but does not always) oppose the continuation.
The case then is required to proceed through the normal litigation processes until either a settlement is achieved, or the Judge decides the case.
William Shakespeare’s character’s comment “The first thing we do, let’s kill all the lawyers” is often thought of as an ironic expression of the ordinary person’s frustration with legal complexities and the cost of going to court.
We are not going to pretend that obtaining an injunction is cheap. It is only worthwhile when there is a lot of money at stake.
Why are we saying this? It is because we do not want to waste your time or ours.
We will always provide you with estimates of the likely legal costs going forward. Like filling a car with petrol before going on a trip, our business model works on the basis that each stage is pre-funded: we hold the funds in our client account on your behalf until they are needed. In this way, our clients can keep track of their ongoing expenditure.
No. Most cases are, in fact, not suitable for a freezing order. It is only where the strict requirements are satisfied that an application will succeed. Where the creditor has a justified concern that there is a real risk that the debtor is planning to dispose of, or hide assets, then it is worth investigating this form of injunction.
At Lewis Nedas Law, you can rely on us to do a proper job at reasonable cost. We have the experience, but we do not have City of London overheads or steep hourly rates. Above all, we want to understand your commercial objectives, and will do our best to achieve them. We work closely with exceptional Counsel as appropriate.
We do not rack up legal costs willy-nilly. We are aware that legal costs are a burden, and we are keen to keep our charges to as low a level as can reasonably achieved. We will guide you as to the most effective ways of enabling us to give you the best service we can, whilst also keeping our fees down.
You can rely on Lewis Nedas to tell you if your case has problems which make it desirable to negotiate a settlement with your opponents.
This article is intended to be no more than a general guide, and does not comprise legal advice. You are strongly advised to take legal advice before making or resisting any application to the Court.
For legal advice and assistance please contact Ian Coupland, Head of Commercial and Litigation, Lewis Nedas Law on 02073872032 or icoupland@lewisnedas.co.uk
All domestic and commercial buildings in the UK available to buy or rent must have an Energy Performance Certificate (EPC), giving the property an energy efficiency rating from A (very efficient) to G (inefficient). They are intended to give an indication of how costly it will be to heat and light the Property and its likely carbon dioxide emissions. An EPC is accompanied by a report recommending any cost-effective improvements that might be made to the property to achieve a better rating.
On 1st July 2020 the Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 will come into force in England and Wales.
All private landlords of tenancies commencing on or after 1 July 2020 will be required to have electrical safety inspections and a condition report (EICR) carried out by a competent qualified person. The Landlord then has to provide a copy of the EICR to their tenants confirming that the inspection has been carried out and that the property complies with the standards set out in the 18th Edition of the Wiring Regulations.
The report must be given to the prospective tenants prior to occupation and whenever a certificate is replaced after a new inspection has taken effect and within the 28 days’ period of any request from the existing tenants, prospective tenants or the Local Authority.
An EICR is valid for 5 years but this is not always the case and care should be taken to ensure a replacement is obtained before the expiry date given in the certificate.
Landlords with existing tenancies (i.e. those which have commenced prior to 1 July 2020) have until 1st April 2021 to have the inspection carried out and the certificate provided to the tenant.
In the event that a breach is identified in an EICR then that needs to be investigated further or remedied within 28 days and once remedied a further report is required to confirm that works have been carried out and that the property now complies with the regulations.
This would surely add more to further compliance that landlords would have to abide with. Equally, landlords with older but full functional and safe electrical installation would need to comply with the 18th Edition of the Wiring Regulations prior to re-letting or upon request of a new certificate from their existing tenants. In the event that the installation is not compliant with the 18th Edition of the EICR and reveals a non–satisfactory result, then landlords would have to use their best endeavours to remedy this and obtain an upgrade in order to comply with those regulations so that they do not fall foul of these new rules which would lead to potential tenant’s disputes.
The 18th Edition only came into force in 2019 so it is possible that any EICR obtained prior to that date will not be valid for the purpose of these regulations (as it would refer to the wrong edition of the Wiring Regulations)
The penalty for failing to comply is a heavy fine (maximum £30,000), a requirement to carry out the work in any event or the local authority carrying out the work and then charging it back to the landlord.
It is not yet clear whether the failure to provide a certificate will prevent the landlord form issuing a s21 notice but there may be parallels drawn with the Gas Safety regulations which have resulted in landlords being unable to serve s21 notices at all where they have failed to provide a copy of the gas safety certificate to their tenant before they occupy the property. It would be prudent to ensure that new tenants are without fail given the EICR before they occupy.
It would be wise for all landlords to follow the Government Guidance on renting and validity on serving a section 21 notice.
There has been no indication from the Government or the relevant authorities that these regulations have been delayed. In light of that, all private landlords are strongly advised to comply with the measures considering the hefty penalty for not doing so.
For more detailed information, please do not hesitate to contact us at Lewis Nedas Law. Our team of experts would be more than delighted to assist and also provide the most favourable advice in order to meet your requirements.
Please do not hesitate to contact our following specialist:
Naziana Mehdy is a Partner within the Property Department and specialises in all aspects of Residential, Commercial Property and Corporate Real Estate. She can be contacted on 02073872032
All domestic and commercial buildings in the UK available to buy or rent must have an Energy Performance Certificate (EPC), giving the property an energy efficiency rating from A (very efficient) to G (inefficient). They are intended to give an indication of how costly it will be to heat and light the Property and its likely carbon dioxide emissions. An EPC is accompanied by a report recommending any cost-effective improvements that might be made to the property to achieve a better rating.
On 1st July 2020 the Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020 will come into force in England and Wales.
All private landlords of tenancies commencing on or after 1 July 2020 will be required to have electrical safety inspections and a condition report (EICR) carried out by a competent qualified person. The Landlord then has to provide a copy of the EICR to their tenants confirming that the inspection has been carried out and that the property complies with the standards set out in the 18th Edition of the Wiring Regulations.
The report must be given to the prospective tenants prior to occupation and whenever a certificate is replaced after a new inspection has taken effect and within the 28 days’ period of any request from the existing tenants, prospective tenants or the Local Authority.
An EICR is valid for 5 years but this is not always the case and care should be taken to ensure a replacement is obtained before the expiry date given in the certificate.
Landlords with existing tenancies (i.e. those which have commenced prior to 1 July 2020) have until 1st April 2021 to have the inspection carried out and the certificate provided to the tenant.
In the event that a breach is identified in an EICR then that needs to be investigated further or remedied within 28 days and once remedied a further report is required to confirm that works have been carried out and that the property now complies with the regulations.
This would surely add more to further compliance that landlords would have to abide with. Equally, landlords with older but full functional and safe electrical installation would need to comply with the 18th Edition of the Wiring Regulations prior to re-letting or upon request of a new certificate from their existing tenants. In the event that the installation is not compliant with the 18th Edition of the EICR and reveals a non–satisfactory result, then landlords would have to use their best endeavours to remedy this and obtain an upgrade in order to comply with those regulations so that they do not fall foul of these new rules which would lead to potential tenant’s disputes.
The 18th Edition only came into force in 2019 so it is possible that any EICR obtained prior to that date will not be valid for the purpose of these regulations (as it would refer to the wrong edition of the Wiring Regulations)
The penalty for failing to comply is a heavy fine (maximum £30,000), a requirement to carry out the work in any event or the local authority carrying out the work and then charging it back to the landlord.
It is not yet clear whether the failure to provide a certificate will prevent the landlord form issuing a s21 notice but there may be parallels drawn with the Gas Safety regulations which have resulted in landlords being unable to serve s21 notices at all where they have failed to provide a copy of the gas safety certificate to their tenant before they occupy the property. It would be prudent to ensure that new tenants are without fail given the EICR before they occupy.
It would be wise for all landlords to follow the Government Guidance on renting and validity on serving a section 21 notice.
There has been no indication from the Government or the relevant authorities that these regulations have been delayed. In light of that, all private landlords are strongly advised to comply with the measures considering the hefty penalty for not doing so.
For more detailed information, please do not hesitate to contact us at Lewis Nedas Law. Our team of experts would be more than delighted to assist and also provide the most favourable advice in order to meet your requirements.
Please do not hesitate to contact our following specialist:
Naziana Mehdy is a Partner within the Property Department and specialises in all aspects of Residential, Commercial Property and Corporate Real Estate. She can be contacted on 02073872032
By Ian Coupland, Director and Head of Commercial & Litigation at Lewis Nedas Law
COVID-19 is a human tragedy and the impact is being felt by businesses and economies around the world. We are all bracing ourselves for the challenges that lie ahead. Below I have attempted to answer some of the questions which I am being frequently asked by concerned clients.
Insolvency is often looked on as purely a method of debt collection, but there is so much more to it.
Q. What is it?
Q. What then happens?
Q. What are Director Disqualification Proceedings?
Q. Can the proposed Liquidation be challenged?
Q. What is it?
Q. Can the proposed Bankruptcy be challenged?
Q. What is the effect of being made Bankrupt?
But what if it is simply a cash flow issue and time is required for restructuring? – there are various options:
Q. What is it?
Q. How does it work?
Q. Is there any other benefit to do this?
Q. What is it?
Q. How does it work?
Q. Are there any differences from an IVA?
Q. What it’s purpose?
Q. How does it work?
He has over 30 years’ experience in dealing with all aspects of Business and Commercial Law, Employment, Insolvency, Litigation and Regulatory Law having qualified in 1988.
He is a member of the Insolvency Lawyers Association and regularly advises clients on Insolvency and Restructuring scenarios and acts for Insolvency Practitioners.
Ian can be contacted on 020 7387 2032.
A Norwich employment tribunal has recently ruled that ethical veganism amounts to a philosophical belief, thereby affording its protection under the Equality Act 2010.
Jordi Casamitjana has brought a claim against the League Against Cruel Sports alleging that he has been dismissed due to his ethical veganism beliefs, after he raised concerns that his former employer had been investing its pension funds in companies that tested products on animals.
Whilst the case is ongoing and it is yet to be decided by the Tribunal whether or not in this particular instance the former employer was dismissed because of his belief, the Tribunal has determined that ethical veganism is a belief capable of being one afforded protection against discrimination.
It should be noted that this judgment is within the first tier of the Employment Tribunal and therefore it does not have a binding effect. However, it does provide employers with some guidance as to the likely treatment of ethical veganism before the Tribunal in the future.
Practically speaking, this means that employers will potentially need to consider the services and products provided in the workplace and undertake measures such as, for example, avoiding wool in uniforms and offering vegan-friendly food options.
Should you wish to discuss any employment-related concerns or disputes, please contact Abigail Williams using the details below:
At Lewis Nedas Law, we act for both employers and employees in a wide variety of disputes from settlement agreements to Employment Tribunal trials.
Whilst Employers may be under the belief that they need only consider the knowledge of an actual decision-maker when dismissing an employee, following a recent decision of the Supreme Court in Jhuti v Royal Mail Limited, a dismissal can still be deemed to be an unfair one even if it can be demonstrated that the decision-maker was not aware of the true (and unfair) circumstances leading to the dismissal.
In the early stages of employment, Ms Jhuti made protected whistleblowing disclosures to her line manager. However, she was subsequently encouraged to retract these allegations and henceforth was criticised for her performance. As a result of this, Ms Jhuti raised a grievance with her employer and was signed off from work on sick leave. During the course of this, another manager who knew nothing of Ms Jhuti’s disclosures or grievance, determined that her employment should be terminated based on poor performance and thereby innocently relying on information on performance that had been provided by the first manager to whom Ms Jhuti had made the protected disclosures.
Ms Jhuti successfully brought a claim on the basis that the principle reason for her dismissal related to the protected disclosures she had made to her first manager, and not to poor performance.
In claims for unfair dismissal under the Employment Rights Act 1996, the courts had in general only previously considered the reason for dismissal given by the decision-maker. Whilst the circumstances, in this case, are relatively extreme, it demonstrates the caution that employers must take when dismissing an employee as if it can be found that the true reason for a dismissal is hidden behind an engineered reason, the court will penetrate the engineered reason and consider the true reason for dismissal, regardless of the knowledge of any decision-maker.
Should you wish to discuss any employment-related disputes, please contact Abigail Williams using the details below:
Abigail represents employers and senior managers, and can support your Human Resources Department in any disputes that may arise.
Presenter Samira Ahmed has won her Employment Tribunal claim against the BBC in a dispute over equal pay.
Ahmed argued that she was underpaid in comparison to fellow male presenter, Jeremy Vine whilst they were both presenting similar programmes.
Between 2008 and 2018 Vine was paid £3,000 per episode of Points of View shown on BBC One, whilst Ahmed was paid a mere £400 per episode for Newswatch which was shown on BBC Breakfast and the BBC News Channel.
The onus was on the BBC to demonstrate that the difference in pay, between the two presenters, was due to reasons other than sex discrimination and the BBC failed to do so. The Tribunal found that the difference in pay was “striking” in that Vine was paid more than six times that of Ahmed for undertaking very similar work.
The BBC argued that Vine had a greater profile, Points of View reached a larger public audience and that Entertainment and News require different skills from presenters, however this did not persuade the Tribunal that the difference in pay was justified.
The BBC has commented that it was “unable to call people who had made decisions as far back as 2008 and have long since left the BBC.” It admitted that it’s pay framework, in the past, had not been “transparent and fair enough” and that it had made “significant changes to address this.”
The case emphasises the need for employers to ensure that pay frameworks are fair and transparent, particularly with regard to employees providing similar services and of equal experience and skill.
Should you wish to discuss any employment-related disputes, please contact Abigail Williams
Abigail can represent both employers and employees in all Employment Tribunal claims, providing pragmatic advice to achieve the best outcome in your circumstances.
A company can apply to be removed and struck off the register of companies and dissolved where it is no longer needed. There are various reasons why this may be required, for example:
Voluntary strike off and dissolution does not replace formal insolvency proceedings where these are relevant, and if a dissolved company has outstanding creditors, then they can apply for the company to be restored to the register. Directors must ensure that they follow the correct procedure and notification requirements to avoid penalties.
Before a company applies to be dissolved and struck off, the creditors must be notified. All final matters should be dealt with before the application is made, such as closing bank accounts and transferring the domain name. All assets belonging to the company including bank accounts must be closed and sold off since, on dissolution, any credit or assets remaining will vest in the Crown. The directors then need to complete a form DS01 which has to be signed by a majority of directors. There is also a nominal fee that needs to be paid when the form is submitted.
Within 7 days of making the application, the directors must notify all interested parties including members, creditors, employees, suppliers, banks, guarantors, managers/trustees of any employee pension fund and any directors that have not signed the DS01 form. Anyone that becomes a director, member, creditor, employee or manager/trustee of any employee trust fund must also be notified within 7 days of the appointment. Organisations interested in the company’s affairs must also be notified, for example, the HMRC, Department of Work and Pensions, local authorities and government agencies.
Once Companies House receives the application it will respond to the address given as well as the company’s registered address to confirm the application is not bogus. It will also publish a notice in the London, Edinburgh or Belfast Gazette (depending on where the company was formed). That allows interested parties the opportunity to object as well as placing a copy on the company’s public record. If there are no objections, then the company will be struck off the register within three months of the date of the notice and dissolved after the publication of a further notice in the relevant Gazette.
Any interested party can object to the company being struck off if there are relevant grounds under the Companies Act 2006. This can occur where the company:
Where the directors change their mind, they can apply to withdraw their application.
It is also possible for the registrar to decide to strike off a company. The registrar must have reasonable cause to believe the company is not carrying on business. Situations, where this may occur, is where any letters sent to the registered address are returned as undelivered, the company has no directors or any relevant documentation required from the company has not been sent to the registrar. The registrar must issue two formal letters to the company’s registered offices to confirm if this is the case. Where the registrar does not receive a suitable explanation, it will then place a notice in the Gazette that allows interested parties to object. Where this does not occur then the company will be struck off once two months has passed from the notice being published.
Voluntary dissolution and strike off are not available to every company. Companies that fall under the following circumstances are not allowed to apply:
Where the company commits an offence in relation to this procedure, the directors can face stiff penalties. It is an offence to apply for a company to be struck off when it is not eligible or to not withdraw the application when a company becomes ineligible. It is also an offence not to inform any interested parties within 7 days, which can result in a fine and up to 7-years’ imprisonment. It is also an offence to give false or misleading information in support of an application. These offences can result in fines of up to £5000 for summary trial and unlimited on indictment. Directors that fail to comply with the relevant statutory requirements can face criminal sanctions and disqualification from being a director for up to 15 years.
Any interested party can apply to the Courts to have a company that has been struck off and dissolved to be restored to the register of companies. This would result in the company being brought back as if it was never struck off. The time period to allow for restoration by the Courts is generally 6 years from dissolution. There are no time limits for personal injury claims.
Normally a company will be restored with the name it used before it was struck off and dissolved. However, where another company now uses that name, this is not possible. Therefore, the Court order may give a different name that the company being restored is to use. Companies House will issue a change of name certificate as if the company had applied to change its name. Or the company can be registered with the registered company number as its name. The company has 14 days from the date of restoration to apply for a name change for the company and will need to pay the necessary fees.
Bringing a company to an end requires meticulous attention to what debts and liabilities are owed and to which interested parties who might object to the company being struck off.
The Insolvency Solicitors at Lewis Nedas have served a wide range of clients with their financial affairs during difficult times, including directors in insolvency and stakeholders such as banks, sponsors and landlords. We have provided expert advice on salvaging company prospects, including reorganising and restructuring of debts.
For further information or to speak to our expert Corporate Recovery & Insolvency Lawyers, please contact us on 020 7387 2032 orcomplete our online enquiry form.
Injunctive relief is a legal remedy granted by the court on the application of a party to require a defendant to either do something (a mandatory injunction) or to stop them from doing something (a prohibitory injunction) in order to protect property, reputation or business interests. Injunctive relief is an ancillary order and can be ordered alongside financial damages sought by the claimant. The award of this type of injunction requires the defendant to cease from certain actions or to take specific action pending the outcome of the proceedings, which is when a final injunctive order can be granted. If a party breaches an injunction, then they can be held in Contempt of Court which can ultimately lead to imprisonment.