Early Dissolution

Part 3 Early Dissolution

March 2010

38.33 Official receiver’s ability to apply for early dissolution

When the official receiver is liquidator he/she may at any time apply to the  registrar for the early dissolution of the company where it appears:-

  1. the realisable assets are insufficient to cover the expenses of the winding-up, and
  2. the affairs of the company do not require any further investigation.

The making of the application, including the raising and sending of form NOTCH to the Registrar of Companies, will be dealt with by Estate Accounts Services, Operations and Customer Support, Releases (see paragraph 37.9) [Note 1].

 

38.34 Identification of early dissolution cases

Early dissolution is intended to save time in case administration. Suitable cases may be identified at the CAR stage, that is up to eight weeks after the making of the winding-up order. Any assets having a net realisable value should be realised before the dissolution to defray the costs of the proceedings. The early dissolution procedure should not be used in cases where there is a prospect of disqualification and/or criminal proceedings or an immediate or foreseeable need to defer the dissolution of the company.

 

38.35 Administrative receiver in office

The official receiver should not invoke the early dissolution procedure when there is an administrative receiver in office as it is likely that the administrative receiver will require the company to remain on the register pending the completion of the receivership. The dissolution of the company would result in the company’s assets becoming “bona vacantia” (see Part 7 of this chapter) thus preventing the administrative receiver from dealing with them.

 

38.36 Law of Property Act receiver in office

The Insolvency Act is silent in regard to Law of Property Act receivers. However, early dissolution of a company would create additional work for such a receiver and as a result, generally, early dissolution should not be applied for where a Law of Property Act receiver is in office.

 

38.37 Administration of estate when Administrative receivers or Law of Property Act receivers are in office

In these cases the official receiver should proceed with the winding up without invoking early dissolution and apply to the Secretary of State to issue directions for the deferral of the company’s dissolution when he applies for his release (part 5). That is unless the administrative receiver or Law of Property Act receiver agrees, in writing, to the use of the early dissolution provisions.

 

38.38 Sending notice of early dissolution

The official receiver must give at least 28 days notice of his/her intention to apply for early dissolution to the creditors and contributories and any administrative receiver in office. The legislation does not require notice to be given to a Law of Property Act receiver who is still in office, however a notice should be sent [Note 2].

 

38.39 Notice of early dissolution

The form used for this purpose is called NED and can be sent with the report to creditors and contributories and notice of no meeting. These notices are included with the notice of early dissolution to save administration costs.  Where the official receiver has notified the creditors of his intention to apply for the early dissolution of the company, there is no obligation to give creditors notification of his/her intention to apply for release (see paragraph 37.9).

 

38.40 Official receiver’s privilege

If the report to creditors is sent out after the notice of the intention to apply for early dissolution, the official receiver may not be covered by privilege (see paragraph 18.13) as his/her only duty after giving such notice is to continue the application for early dissolution [Note 3]. 

 

38.41 Consequence of notice under s202

Following notice of intention to seek early dissolution under section 202 the official receiver, any creditor or contributory or the administrative receiver may apply to the Secretary of State for directions on the grounds that:-

1. the realisable assets of the company are sufficient to cover the expenses of the winding up;

2. that the affairs of the company require further investigation; or

3. that for any other reason the early dissolution of the company is inappropriate [Note 4].

The Secretary of State may issue a direction:

a.   such as he/she thinks fit to enable the winding up to continue as if no notice of intention to apply for early dissolution had been given, or

b.   where an application for early dissolution has already been received by the registrar that the date of dissolution be deferred for such a period as he/she thinks fit [Note 5].

 

38.42 Right of Appeal

Under section 203 an appeal may be made to the court regarding any decision of the Secretary of State on an application for directions [Note 6]. A copy of any directions issued or the determination of an appeal should be delivered to the registrar by the applicant or the person in whose favour an appeal is determined within 7 days of the direction or determination of the appeal. This will ensure the registrar is fully informed of the position and that the company is not inadvertently dissolved [Note 7]. Anyone who fails to deliver such a copy, without reasonable excuse, is liable to a fine [Note 8].

 

38.43 Application for release

The official receiver can apply for release and early dissolution at the same time using forms RELASS and NED. Estate Accounts Services, Operations and Customer Support, Releases will file all the relevant documents at court and Companies House [Note 9].

An application for early dissolution does not require the official receiver to give creditors notification of his/her intention to apply for release therefore the official receiver should consider only issuing notice of early dissolution to keep administrative costs to a minimum. The procedure for applying for early dissolution is set out in paragraph 38.38 to paragraph 38.40.

 

[Back to part 2 Dissolution after winding up] [On to part 4 Dissolution after completion of winding-up]