Early Dissolution

October 2007                                    

Introduction

1. What does “dissolution" mean?

The dissolution of a company ends its legal existence. Its property then either belongs to the Crown or more unusually, the Duchies of Cornwall or Lancaster, depending on location of the company’s registered office. The dissolution of a company in liquidation will take place automatically three months after the Registrar of Companies has received either:

a. a notice from the official receiver that the winding up of the company is complete,

or

b. a notice from the insolvency practitioner liquidator that he/she has held a final meeting of creditors and enclosing an account of the winding up.

Where a company is not in liquidation and the Registrar has reason to believe that the company is not trading or operating it may be ‘struck off’ the Register of Companies and then dissolved.  A court order is necessary to bring the company back into existence by declaring the dissolution void or restoring it to the Register.

2. What is "early dissolution"?

The Insolvency Act 1986, allows the official receiver to apply for a company’s dissolution at an early stage in its winding up. The procedure for doing so is known as "early dissolution".

This procedure saves time spent in administering those liquidations where there will not be a payment to creditors and there will be no disqualification or criminal proceedings.

The official receiver, when liquidator, may apply to the Registrar of Companies for the early dissolution of a company. This is done where the company has no assets, or the total value of any assets is insufficient to cover the costs of its winding up and the affairs of the company do not need any further investigation.

The time saved in unnecessary administration is achieved by condensing all the obligatory notices to creditors and contributories into one form, NED (Dissolution – notice under s202(3) of proposed application for early dissolution), LOIS (DO73). In effect this combines the no meeting notice with the report to creditors and also acts as a ‘closing notice’ (official receiver’s intention to apply for release).

3. Notice of application for early dissolution

Before making an application, the official receiver must give creditors, contributories and any administrative receiver in office at least 28 working days notice of his/her intention to apply for the early dissolution of the company. The form used for this purpose is the NED, LOIS (DO73).

Section 202(3) of the Insolvency Act 1986 does not require that notice be given to a Law of Property Act receiver who is still in office however, in practice notice should be given.  

4. Electronic delivery of notices and the use of Websites

(October 2010)

With effect from 6 April 2010 the official receiver is permitted to send notices by electronic means provided that the recipient has consented and has provided an electronic address for delivery.

The official receiver may also satisfy his or her requirement to notify creditors and contributories by the notice being available for viewing or downloading on a website. The official receiver is required to notify creditors and contributories of the address of the website together with any password required to access or download the document. The notice must also contain a statement informing the recipient of their entitlement to request a hard copy of the notice and specify a telephone number, e-mail address and postal address to make such a request.

Accordingly, the official receiver could utilise electronic means or a website for giving notice of his/her intention to apply for early dissolution.

For more information on using electronic delivery and websites see Case Help Manual part – Report to creditors.

5. Administrative receiver or Law of Property Act (LPA) receiver in office

Generally, an application for early dissolution will not be appropriate where an administrative receiver or LPA receiver is still in office.

However, in a small minority of cases, the receiver may agree to the early dissolution of the company, but most likely he/she will require a company to remain on the Register until the receivership has been completed. This is because the dissolution of a company results in any assets becoming Crown property and the receiver would be unable to deal with them. Further, when a company is dissolved by the Registrar of Companies, its file is closed and the receiver will be unable to file any documents at Companies House.

Usually, where there is an administrative receiver or LPA receiver in office, the official receiver will request that the Secretary of State defer a company’s dissolution when applying for his/her release as liquidator in the normal way.

For further information on this procedure, please refer to the Case Help Manual part: Dissolution - Deferral of Dissolution.

6. Application for Release

After the 28 day notice has elapsed, and where no objection to early dissolution has been received, the official receiver should apply to the Secretary of State for his/her release as liquidator. Application is made on form RELASS (Liquidator (Release) - official receiver’s application to the Secretary of State for release as liquidator), LOIS (DO73).

By having issued form NED (notice of proposed application for early dissolution), previously, the official receiver is relieved of the obligation of issuing notices to proved creditors reporting his/her intention to apply for release.

When release is granted, the ‘OR Release Team’ of the Estate Account Services (EAS) in Birmingham will send the official receiver’s application for early dissolution (form NOTCH) to Companies House and notify the Registrar and the court that the winding up is complete and the official receiver is released.

7. Appeal against early dissolution

If, after receiving the notice of early dissolution, a creditor, a contributory, or a receiver objects to early dissolution, they may apply to the EAS, acting on behalf of the Secretary of State, to override the application on the grounds that:

a.  the realisable assets are sufficient to cover the expenses of the winding up; or

b.  the affairs of the company require further investigation; or

c.  for any other valid reason, the early dissolution of the company is inappropriate and therefore that the liquidation continues as if the application had not been made.

Also, if the official receiver finds out something new about the company, he/she may ask EAS to stop the early dissolution procedure. 

8. Objections to early dissolution

Any objections to the early dissolution application must be referred to the examiner without delay.

Upon receipt of a valid objection EAS, on behalf of the Secretary of State, will instruct the official receiver to proceed with the winding up as if no notice had been given of the intended application for early dissolution. In these circumstances, a report to creditors, etc. would need to be issued.

Note:

This part applies only to "early dissolution" cases. See also, Case Help Manual part: Dissolution - Deferral of Dissolution.

Where can I find out more?

Insolvency Act 1986:

Section 202 – Early dissolution (England and Wales)

Section 203 – Consequence of notice under s202

Insolvency Rules 1986 as amended by The Insolvency (Amendment) Rules 2010:

Rules 4.224 and 4.225 – Dissolution after winding up

Rule 12A.10 Electronic delivery in insolvency proceedings - general

Rule 12A.11 Electronic delivery by office-holders

Rule 12A.12 Use of websites by the office-holder

Companies Act 1985:

Chapter V1 Sections 651 to 658 - Matters arising subsequent to winding up

Technical Manual:

Chapter 37.4 – Early Dissolution

Chapter 38.16 to 38.21- Dissolved companies – Early Dissolution

Chapter 69 – Law of Property Act Receivers

Case Help Manual:

Dissolution - Deferral of Dissolution

Closings

Forms to be used:

NED - Notice under s202(3) of proposed application for early dissolution

RELASS – Official receiver’s application to Secretary of State for release as liquidator

NOTCH – Official receiver’s application to The Registrar of Companies for early dissolution of company under s202(2)

 

Early Dissolution Flowchart 

 

Procedure

1  Receive instruction to apply for early dissolution.

Prepare form NED (notice under s202(3) of proposed application for early dissolution), LOIS (DO73). When producing form NED in LOIS document production you will be prompted to add to the text the values of the company’s assets and liabilities.

Issue a copy of form NED to each creditor, contributory and (if any), to the administrative receiver and any LPA receiver in office, allowing enough time for them to have at least 28 working days notice.

Where any objections are received by telephone, writing or by email they must be passed immediately to the examiner. It is imperative that such matters are dealt with urgently so that, if the objection is valid, the application for early dissolution may be stopped.

5  After 28 days have elapsed without any objection being received an application for release (AFR) can be made.

In early dissolution cases when the official receiver is applying for release, it is not necessary to send creditors a separate ‘closing notice’.

Prepare 2 copies of form RELASS (Official receiver’s application to the Secretary of State for release), LOIS (DO73).

When producing form RELASS in LOIS document production you will be prompted to add to the text the value of any ledger debit balance to be written off. You will also need to delete the paragraph requesting deferral of the company’s dissolution.

Ensure that all fees, costs and charges have been appropriately charged. Attach the LOLA ledger sheet (glr-41) to form RELASS (1 copy) together with a copy of form NED, both from LOIS (DO73).

Before sending to EAS in Birmingham, refer to the application for release (AFR) checklist and only where there are any exceptions, (in most cases there should not be), complete and attach the checklist to the application for release documents.

Request the cashier to apply for write off of the debit balance on LOLA (glm-81), if appropriate, and record the AFR date on LOIS (CA26).

10 The signed spare copy (or a photocopy) of form RELASS will be placed on the office file.

11  When release is granted, the OR Release Team of EAS will prepare form  NOTCH (OR’s application to Registrar of Companies for early dissolution of a company under Section 202(2) of the Insolvency Act 1986), LOIS (DO73), and will forward this to the Registrar of Companies, Crown Way, Maindy, Cardiff CF14 3UZ.

12  EAS will also forward a certificate of the official receiver’s release to the appropriate court but the official receiver will not receive a copy. The date of release will be automatically recorded on LOIS by LOLA following write off of any debit balance.