In the context of a commercial lease, the dissolution of a tenant company can cause problems for the lease. The tenant's interest in the lease becomes the property of the Crown and if you want to properly bring the lease to an end then you need to get the Crown (acting through the Queen's and Lord Treasurer’s Remembrancer ("QLTR")) to confirm that it is not interested in the lease. They do that - in return for a small fee - by granting a disclaimer. Getting a disclaimer can be important, particularly where the original lease was registered against the title to the leased property, since any prospective new tenant may want to make sure that there are no issues with the title.
However, a company's dissolution is not always the end of the company. The company can be restored to the register using the provisions of the Companies Act 2006. This can be helpful where it comes to light that the company had property (usually cash in bank accounts) at the date of its dissolution. A successful restoration means that the company comes live again and where the restoration has been granted by the court, the general effect is that the company is to be treated as though the dissolution never happened.
In the recent case of ELB Securities Limited v Alan Love and Prestwick Hotels Limited, the court was asked to consider whether the restoration of a company to the Register of Companies in circumstances where the QLTR had disclaimed its interest in the lease meant that the now restored company was still a tenant under the lease.
The landlords (ELB) argued that the disclaimer by the QLTR meant that the tenant (Prestwick Hotels Limited) were no longer tenants under the lease and that the lease was therefore at an end. In the circumstances, the landlords wanted an order from the court for the tenant's removal from the leased property. The tenant argued that the disclaimer by the QLTR was irrelevant because the general effect of restoration meant that the company was "deemed to have continued in existence as if it had not been dissolved or struck off the register…" (see section 1032, Companies Act 2006). They therefore argued that the lease still existed and that they should not have to leave the subjects.
The Inner House of the Court of Session favoured the landlord's argument (and in doing so upheld the decision of the Sheriff Principal although the original sheriff originally decided in favour of the tenant).
In doing so, the court said that if the QLTR does not disclaim property that has vested in the Crown as a result of a dissolution then that property remains vested in the QLTR who can then dispose of it to a third party. If the company is later restored, title to that property is not affected by the restoration - but the QLTR must pay compensation to the restored company. They drew the distinction with the situation where the QLTR does disclaim its interest in the property so, in that scenario, the property vests neither in the QLTR nor in the dissolved company. Applying that to this particular case, the court held that the tenant's rights under the lease came to an end on the date the QLTR disclaimed the lease and, as a result of the disclaimer, the tenant's interest in the lease was deemed never to have vested in the Crown.
The court was particularly keen to stress that the tenant's argument would have caused considerable uncertainly on a commercial level since, in their analysis, a successful application for restoration would simply sweep aside transactions which had taken place in respect of property previously owned by the company. The tenant had argued that the court would only be persuaded to allow restoration if it was satisfied that there wouldn't be any problems with transactions that took place after dissolution. However, the Inner House took the view that this would make the restoration process far more complex and expensive than had been intended by Parliament.
The lesson in all of this for tenants is make sure that your statutory documents are all filed on time. For landlords, if your tenant is dissolved then you should so something about that (i.e. get the QLTR to disclaim their interest in the lease) if you want to avoid a potentially tricky situation if the former tenant is restored but you have already leased the property to someone else.
If you would like any further advice on restoration of dissolved companies, or the effect of dissolution of a tenant company on a lease, please get in touch with us on the details below.