Considered the end point of a liquidation, voluntary dissolution, or formal removal of a company from the government’s companies house and its subsequent registrar, the dissolution of a company usually spells the end of its normal capacity to function as a business.
However, this cessation of normal business operations may be rather confusing, both for the director of the company and any individuals that retain some level of relation to the now dissolved company.
As such, it is important for the dissolved company’s executives as well as other individuals to understand the exact capacity and operational functions of the dissolved company – and what can be done about said dissolution, if they so desire.
What is a Dissolved Company?
A dissolved company is a corporate entity that has been legally recognized as no longer functioning in an operational capacity, either due to voluntary reasons by the directors of said company or involuntarily via creditor, governmental or judicial decision making.
The dissolution of a company is not always necessarily a negative circumstance, and such things like a company no longer being required in society, the director’s subsequent retiring or any other of a multitude of situations can lead to the dissolution of a company under stable and voluntary means.
What is Administrative Dissolution?
Administrative dissolution is a process undertaken by a government entity wherein the functions, rights and power of a business are involuntarily suspended or entirely removed due to a variety of causes such as failure to pay dues, report pertinent information to the correct parties or unlawful and unethical conduct.
Administrative dissolution is considered only one form of dissolution a company may undergo, and is reversible in certain situations by utilizing a process known as entity revival or reinstatement.
How is a Company Dissolved?
A company may be voluntarily dissolved by contacting the Companies House branch of the government and requesting that said company’s name be struck from the register, essentially ending its recognizability in the eyes of the law.
This comes with several caveats, however, as the presence of debts towards creditors or other outstanding liabilities can prevent a company from being voluntarily dissolved without first fulfilling said debts and liabilities.
Other requirements for the dissolution of a company can be the director not having traded any of the company’s stock within the past ninety days so as to prevent any incidence of insider trading, the company having retained its legally recognized name for ninety days as well as the fact that the company is not considered insolvent in any manner.
In What Capacity can a Dissolved Company Operate?
Though a dissolved company is still considered an invalidated business entity with no rights towards trading or other forms of operation, it may still operate in certain capacities that concern internal and governmental affairs.
This usually takes the form of the dissolved company tidying up any left over proceedings that concern it’s dissolution, whether voluntary or involuntary. Such matters like paying of dues, fulfillment of debts and releasing of stipends may be allowed despite the dissolved status of the company.
These matters are also applied to assets, whether liquidated or not, that are being distributed towards shareholders or creditors for the purposes of fulfilling equity debt or similar reasons.
Can a Dissolved Company Continue to Trade?
No – the very status of dissolution spells the end of trading for the dissolved company, making it a violation of the law to continue trading if its name has been removed from the companies’ house register.
The only event wherein a dissolved company is still trading is in the case of an individual misleadingly presenting themselves as said dissolved company for the purposes of misleading an external party.
This is likely not the case if a contract or trade has been made with the dissolved company prior to its dissolution – though the specifics of whether said contract or trade is still valid will depend on a multitude of factors concerning the dissolution of the company, what sort of trade was made, and how far the external party is willing to pursue said trade or contract.
What is Entity Revival for Suspended or Dissolved Companies?
Depending on the particular reasoning behind the dissolution of a company – whether voluntary or by order of a governmental entity – it is entirely possible for a suspended or dissolved company to undergo entity revival or re-opening so as to resume normal operations with the go ahead of all governing bodies.
In the case of a company that has been voluntarily dissolved due to internal decision making, a subsequent filing of motions that indicate the company director’s intention to restore their company to the companies house is all that is required, alongside a small fee.
This process is known as administrative restoration, and is primarily applicable only in situations wherein the company was dissolved in the past six years, and was filed by the director or a shareholder of the company.
If the company was found guilty of trading after its dissolution, or if its dissolution was involuntary, a subsequent court order may be required so as to restore the dissolved company.
Does a Contract with a Dissolved Company Still Apply?
Whether a contract with a now dissolved company still applies or not depends on a large variety of factors, such as the nature of the contract and whether the dissolved company has already completed the tidying up of their affairs.
In instances where the company has only recently been dissolved and the contract is of a monetary or asset focus, and said dissolved company is capable of repaying said contract – fulfilling it should be as simple as getting into contact with a legal representative of the dissolved company.
However, other motions such as the liquidation of assets or the filing of a court petition may be required in more complex situations, especially if said dissolved company is not complying or communicating with the contract party.
For contracts geared towards the rendering of services and similar matters, it is possible for the dissolved company to instead transfer said contracts to another firm of the same nature and specialty, especially if said contract does not involve liquid monetary value or the transfer of hard assets.
Is Entity Revival the Same as Company Restoration?
The term entity revival and that of company restoration essentially mean the same thing, though they are not used interchangeably due to the fact that their geographical origins can differ.
In the UK, company restoration or administrative restoration is the primary term that is used in legal proceedings, especially those in concerns of the company’s house.
The term entity revival, on the other hand, is more often used outside of the UK, such as in Canada or the United States.
References
1. Michael J. Buckle, John L. Thompson. (1995) “The UK Financial System: Theory and Practice” Manchester University Press ISBN 0719048168, 9780719048166
2. Schillig, M. (2016-03-10). Winding-Up and Liquidation. In Resolution and Insolvency of Banks and Financial Institutions. : Oxford University Press. Retrieved 6 Feb. 2022, from https://oxford.universitypressscholarship.com/view/10.1093/oso/9780198703587.001.0001/isbn-9780198703587-book-part-19.
3. Adela Jones. (October 4 2021) “A New Environment for Directors’ Duties? Navigating the UK’s ‘Rating (Coronavirus) and Directors Disqualification (Dissolved Companies) Bill’” University of Oxford Faculty of Law. Retrieved 6 Feb 2022 from https://www.law.ox.ac.uk/business-law-blog/blog/2021/10/new-environment-directors-duties-navigating-uks-rating-coronavirus
