How to cope when a foreign company in liquidation in England is being dissolved in its country of incorporation

02 May 2014

Printer Friendly Version

What is the impact on a liquidation if a company is dissolved in its country of incorporation? David Leibowitz, restructuring and insolvency partner at Berwin Leighton Paisner LLP, discusses the doctrine of reanimation in light of the case of Re Agrenco Madeira.

Original news

Re Agrenco Madeira—Comércio Internacional Lda [2014] Lexis Citation 52, [2014] All ER (D) 118 (Apr)

A company incorporated under the laws of Portugal entered into liquidation in England. It became clear that the Portuguese authorities had subsequently initiated proceedings for the involuntary dissolution and liquidation of the company in Portugal. The liquidators sought relief in the English court to ensure that there was no question as to their authority to act. The Companies Court decided that, on the proper application of the Insolvency Act 1986, s 225(1) (IA 1986) the liquidators still had that authority.

What were the background facts to the decision?

Agrenco was incorporated under the laws of Portugal. It was wound up in England under IA 1986, s 221 as an unregistered company. At a point in time when the liquidation was well underway but not yet concluded, the liquidators were informed that the Madeiran Offshore Registry had initiated proceedings for the involuntary dissolution and liquidation of Agrenco.

The liquidators applied to the English Companies Court for declaratory relief confirming that, if Agrenco is dissolved in Portugal, as appeared to be imminent, the winding up in England will continue and they will remain duly authorised to discharge their functions as liquidators.

Authorities considered

Mr Bayfield, Counsel for the liquidators, referred the court to the decisions of the House of Lords in Russian and English Bank and Florance Montefiore Guedalla v Baring Brothers & Co Ltd [1936] AC 405, [1936] 1 All ER 505 and the decision of Mann J in Re Eurodis Electron [2011] EWHC 1025 (Ch), [2011] All ER (D) 48 (May).

What is the doctrine of ‘reanimation’?

Under IA 1986, s 225(1), a foreign company can be the subject of a winding up order in England if the company has already been dissolved in its country of incorporation.

The section is a statutory exception to the principle that the law of the state of incorporation alone is competent to regulate any question concerning the company’s status and continued existence.

The doctrine is known as reanimation—the company is revivified for the sole purpose of allowing it to undergo a winding up in England.

The justification for creating a statutory exception whereby the English courts are empowered to wind up a foreign company, even when that company has been dissolved in its home country, is the overriding necessity to safeguard the legitimate interests of parties in this jurisdiction.

What is the scope of the doctrine?

The doctrine only applies if the company is wound up (eg not if the company is in administration (see Mann J in Re Eurodis Electron Ltd plc).

What is the position if the liquidation predates the dissolution?

What is the position if the winding up is already underway in England and at some point during the life the liquidation, the company is dissolved in its state of incorporation? Do the liquidators still have capacity to act? Can the liquidation continue?

This was the issue that the court had to address in the recent case of Re Agrenco Madeira. There are no previously reported cases directly on this point.

What did the Registrar decide?

The Registrar made a declaration that:

the winding up would survive any dissolution in Portugal
the winding up would continue to have effect notwithstanding dissolution, and
the liquidators would continue to be authorised to perform their duties as liquidators notwithstanding dissolution

In his judgment he concluded:

it is not the case that an English winding up immediately ceases to have effect when the company is dissolved under the foreign law of incorporation
the statutory wording in IA 1986, s 225(1) is broad enough to cover this scenario—the section provides that the company ‘may be wound up’ not that ‘a winding up order may be made’ such that, notwithstanding the dissolution, a pre-dissolution winding up continues post-dissolution
this conclusion is consistent with principle and statutory construction
it would be wrong not to grant relief in circumstances in which a fresh winding up order could be made on a petition presented after dissolution

What does the decision mean for liquidators winding up foreign companies in England when the company is at risk of dissolution?

Best practice is for liquidators to seek to get the threat of dissolution abroad removed completely or at least put on hold until conclusion of the winding up. If this is not possible, the liquidators should make an application to the English court for declarations that the winding up survives the dissolution and that notwithstanding dissolution, the liquidators remain authorised to act. On the basis of Re Agrenco Madeira, liquidators can expect to get declarations in those terms from the court.