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tdlawyer
tdlawyer, Lawyer
Category: Law
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Experience:  11 years experience of general practice.
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If a dissolved company owes you money are you considered to

Customer Question

If a dissolved company owes you money are you considered to be an ‘unsecured creditor’?
- Many thanks for your time.
Submitted: 2 years ago.
Category: Law
Expert:  tdlawyer replied 2 years ago.

tdlawyer :

Many thanks for your question. My name is Tony, I can answer this for you.

tdlawyer :

If a company has been dissolved, it no longer exists as a matter of law. It cannot therefore owe you anything, because it does not exist.

tdlawyer :

I appreciate that might sound a little strange.

tdlawyer :

But technically, a new company in exactly the same name could be formed, and it would not owe you anything, being an entirely new company, and one that had nothing to do with the cause of the debt due to you.

tdlawyer :

So in theory, you would not be an unsecured creditor of the company. Because there is no company.

tdlawyer :

If the company owes you money, you should have proved for it in the liquidation, prior to its dissolution, assuming it went through a formal liquidation process.

tdlawyer :

What you can do, however, is apply to have the company restored to the register for the purposes of trying to recover money due from it. Unless the company received a distribution in the course of the liquidation, there is probably no point in doing that.

tdlawyer :

I hope this answers your question? If not, I am around to the rest of the evening, so feel free to ask any further questions that you might have.

Customer: replied 2 years ago.

Hello, and thank you for your assistance. Presently I am researching ‘piercing the corporate veil’ and if it could potentially be applicable in my case. I am preparing a Witness Statement to accompany a N244 and just wanted to ensure I was using the correct language. The circumstances are as follows:


 


► A Ltd. company refuses to acknowledge wages due to an ex-employee.


► The ex-employee commences proceedings to go to court and a trial date is set.


► The Ltd. company continues to trade despite being insolvent.


► The directors of the Ltd. company set up as a Sole Trader/Partnership and transfer all business to the new company (offering the same services, for the same prices, from the same address, with the same members of staff).


► The directors allow the Ltd. company to ‘die-off’ due to non-compliance with Companies House (relating to filing) while continuing to trade as the new Sole Trader/Partnership – thus avoiding liquidation or administration.


► The ex-employee, as Claimant, is unable to pursue the case in court as the official Defendant (the Ltd. company) officially no longer exists.


 


 


From what I have researched so far, it would appear that my strongest suit might be to make an application to the Court to ‘pierce the corporate veil’, although I am aware of the following:


 


▪ s.899 Companies Act: Court sanction for compromise or arrangement.


 


▪ s.900 Companies Act: Powers to court to facilitate reconstruction or amalgamation.


 


▪ s.938 Companies Act: Power of court to summon meeting of member or creditors of existing transferee company.


 


▪ s.1031 Companies Act: Effect of court order for restoration to the register.




I am therefore unsure if I would be better off requesting that the liabilities of the “transferor company” to be transferred to “the transferee company” rather than pursuing the ‘piercing the corporate veil’, or if in fact another option might be best – or if there is some way of completing the N244 in such a way it opens up all options to the judge rather than narrowing the scope of the application thus permitting him/her to make a decision at their own discretion…?


 


Any advice or recommendations would be welcome.

Expert:  tdlawyer replied 2 years ago.

It is very difficult to make out a claim for piercing the corporate veil. Piercing the veil is reserved pretty much only for cases of fraud and not thinking what you have written suggests to me that there was an actual fraud. You might think that there has been, but that is very different to being able to prove that there has been, to the court's satisfaction for the purposes of doing what you intend to do.

Where employees transfer from one company to the other, as a consequence of the TUPE Regulations, liability to pay wages will automatically pass to the new company. Therefore, a claim for outstanding wages may be better made against the new company under these regulations.

A great starting point for understanding TUPE is this: http://www.acas.org.uk/index.aspx?articleid=1655

I hope this helps.

Tony

Customer: replied 2 years ago.

Hello, and thanks for your help. In light of your comments, would it therefore be appropriate for me to write the following for point 3 (“What order are you asking the court to make and why?”), when completing an N244 Application form:


 


 


To make an application to the Court to ‘pierce the corporate veil’; requesting that individuals be included as Defendants. Namely, [name of director 1] and [name of director 2] – the former Directors of [name of company] (the 1st Defendant).


 


OR


 


To make an order pertaining to s.900 of the Companies Act 2006 for the amalgamation of the dissolved company [name of company], and the currently trading business [name of 2nd company], and the subsequent transference of liabilities from the transferor company to the transferee company; thus making provision for the continuation of legal proceedings against the transferor company.



At the discretion of the Court [or should that be ‘Judge’?].


 


 


- Thanks.

Expert:  tdlawyer replied 2 years ago.

I'm not sure it would be either of those.



I think it would be a straightforward as issuing a new claim against the correct defendant, and quoting the provisions of TUPE as the basis liability.

I think section 900 of the companies act relates to something entirely different has more to do with restructuring an apportionment of liability.

Tony

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