Was the liquidation order of a dissolved British limited company justified?

A British limited company, active but incorporated under British law, had been deregistered from Companies House. A Creditor then petitioned for the company’s liquidation, which was granted. The board appealed. Was this liquidation order justified? Insolvency Law Lawyer Wang Chan explains the case.

Entrepreneurs and British limited companies

In recent years, partly as a result of attractive conditions for incorporation, Entrepreneurs have started setting up British limited companies. Although a Flex BV (under the Private Company Law (Simplification and Flexibilization) Act) has now become an attractive alternative, a legal entity under British law is no longer an exotic species among the various legal forms with which business activities can be developed.

Appeal against a liquidation order

In a case recently reviewed by the Court of Appeal in The Hague, in an appeal against a liquidation order, the question arose whether the court could have justifiably ordered the liquidation of a taxi company established under British law. This company had already been deregistered from Companies House well before its liquidation as a result of a ‘compulsory strike-off’, which was a deregistration following non-compliance with obligations in the Hong Kong. The company had thus ceased to exist under British law, and no liquidation had been carried out.

Did the Court have jurisdiction to order liquidation?

The Court of Appeal first of all ruled that a Court had jurisdiction and that the question could be answered as to whether the court could order the liquidation on the basis of the European Insolvency Regulation under the Law. In a general sense, the Court of Appeal considered that under the Law, it is possible to order the liquidation of a dissolved legal entity that, in the opinion of its board, no longer has any income and has ceased to exist, at the request of a creditor who believes that there still is income.

Insolvency Law Lawyer in liquidation cases

The Court of Appeal concluded that this was no different for a company incorporated under British law that has its primary interests. Even if this company had already been dissolved by a compulsory strike-off. And especially as there appeared to be several creditors, the company had ceased to pay, and income could not be excluded. Income could consist of a claim in respect of directors’ and officers’ liability and/or the fact that the shares had not been fully paid up. The Court of Appeal, therefore, upheld the liquidation order.