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Counting down: Two months left to restore companies dissolved before 1 October 2009 to the companies register

August 2015

Counting down: Two months left to restore companies dissolved before 1 October 2009 to the companies register

With two months left before 1 October 2015, the deadline for restoring a previously dissolved company to the companies register is fast approaching.  With significant consequences for secured lenders with accounts where the security provided for mortgages and/or loans was granted by companies who have subsequently been dissolved, we consider the potential impact and next steps.

Background
Sometimes, court proceedings or work to perfect defective mortgage security, require a company that has been struck off following dissolution to be re-instated to attempt to resolve the problem. In those cases where a company was struck off the Companies Register before 1 October 2009, then pursuant to sections 652 and 652A of the Companies Act 1985, any application to restore must be made before 1 October 2015 (6 years from commencement of the Companies Act 2006).

How will this affect secured lenders?
Commercial and Residential lending to companies, for example property development companies or ‘buy-to-let’, are good examples of the types of secured lending accounts potentially affected by the upcoming deadline. The facts, parameters and limitations of each case will need to be thoroughly assessed. Issues may range from the original solicitor failing to adequately secure the interest against the title of the company’s property, to cases where the legal charge has been discharged in error and requires reinstatement.  In either scenario, if such situations are left unresolved after 1 October 2015, then the mortgage lender may be facing expensive litigation in order to pursue an unsecured debt, or be left without a remedy at all. In the case of a discharge in error, the consequences of missing the reinstatement deadline will result in the debt becoming a debt of the company and the mortgage lender will become a creditor of the dissolved company, which may well result in substantive loss for the lender.

Next steps
Mortgage lenders would be well advised to review all potentially affected accounts as priority. The Companies Act 2006 extends to Scotland; as such lenders should also consider the potential effect on their Scottish accounts.

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