Escheating bona vacantia—Re Fivestar Properties Ltd

Escheating bona vacantia—Re Fivestar Properties Ltd

Can freehold property—formerly owned by a dissolved company and subsequently disclaimed by the Crown—re-vest in the company on its restoration? Amit Gupta, barrister at St Philips Chambers, examines the decision in Re Fivestar Properties Ltd.

Original news

Re Fivestar Properties Ltd [2015] EWHC 2782 (Ch), [2015] All ER (D) 76 (Oct)

The Chancery Division, in granting a bank's application to restore a company to the register of companies, ruled that, where the Crown disclaimed property vested in it following the dissolution of a company, that disclaimer, under section 1012 of the Companies Act 2006 (CA 2006), was not a 'disposition' of property, and the effect of restoration of the company to the register was that its freehold estate was retrospectively re-created and re-vested in the company in all respects as if it had never been dissolved and as if the freehold had never been disclaimed.

What was the background to the application, briefly?

The bank had provided a loan facility to Fivestar Properties Ltd (the Company) which was secured by way of a legal charge over the freehold in commercial premises (the Property) owned by the Company which had been leased to a large commercial tenant.

The company defaulted on repayment. The bank appointed receivers, who pursued rent from the tenant (which had been paid to another company). Administrators were subsequently appointed (while the receivers were in office) who resolved a claim for unpaid rent. The administrators’ exit strategy from administration was dissolution, and they gave notice under paragraph 84(1) of Schedule B1 to the Insolvency Act 1986. The administrators’ final report stated that there were no further assets to be realised, albeit the freehold was still vested in the Company (as the same report later acknowledged). The Company was dissolved.

On dissolution, the assets remaining in the company's ownership vested in the Crown as bona vacantia under CA 2006, s 1012,

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.