What happens to the property of a company that ceases to exist? Image

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Author: Nicholas Gomez

Corporations can meet their ends in many ways.  Most commonly by liquidation, a process that allows the liquidator to distribute assets in an orderly way.  Sometimes however a company can be struck off the Register for failing to meet statutory Companies House requirements; assets then go into limbo, they become ownerless.

 

In law as in life, the notion of valuable property belonging to no-one is an unsettling one.

 

A way to resolve this problem is to apply for reinstatement whereby the company is brought back to life and the assets continue to belong to it as if nothing had happened.  Occasionally however, nobody can be found with the legal standing to apply to the Registrar or to the Court for reinstatement.

 

In Gibraltar where company structures have often involved the holding of shares by nominees, people claiming beneficial ownership sufficient to allow them to apply for reinstatement sometimes find that they have insufficient documentary evidence to prove such interests and the problem can be exacerbated when the nominees themselves have ceased to exist and their files have gone missing.  Alas, this is not an outlandish proposition and the reader may be surprised as to how many beneficial owners who have failed to give the requirements of company and trust law sufficient respect, have found themselves in exactly that situation!

 

In English law and in Gibraltar, “bona vacantia” is a Latin term meaning “ownerless assets” and the law provides that ownership will pass to the British Crown.  This applies as much to defunct companies as it does to deceased persons.  Of course, this is so if the assets, being real property, are within the jurisdiction of His Majesty’s realms or in the case of personal property (as opposed to real property) of an individual domiciled within those realms.

 

The English law concept of bona vacantia is replicated in other legal systems.  Thus, in countries which operate under Roman law and its derivatives, the concept is known as “res nullius” and as in English law, the law of the domicile of a deceased person / defunct company or the location of immovable assets will apply.  

 

Whether it be bona vacantia or res nullius, the types of property affected will be limitless and include bank accounts, cash, crypto currency wallets, shares in other companies, land interests, intellectual property and so on.  Note however that the liabilities of a defunct company or deceased persons will not vest in the Crown where bona vacantia applies.

 

The eventuality of assets vesting in the Crown will of course only be of concern to someone who claims an interest in those assets, and in such a case, the claimant can of course try to make out his or her claim through the Courts.  However, there is at least one situation where a third party could be interested in ownerless property without actually having a legal and enforceable interest in it.  I refer to the situation of a landlord where the tenant has ceased to exist and the remainder of the term of years vests in the Crown. 

 

Of course, as often happens with leases which require the tenant to pay rent and perform otherwise onerous obligations in terms of repair maintenance and upkeep, the Crown may in the same way as often happens with a liquidator, want to disclaim the lease.  The situation in Gibraltar is that the Crown in Gibraltar has no statutory power to disclaim a lease, and this can bring with it certain complications although, of course, there is technically no reason why the Crown should not be able to sell the lease on to a willing purchaser.

 

The situations described above can give rise to hugely unexpected complications.  In extreme cases these might appear to be unsurmountable from a purely legal point of view, although often practical solutions can be found.  If there is a lesson to be learned it is that if you hold property in the name of a limited company, you must make sure that the company is at all times in good standing and where shares are held by nominees, that the nominees are also in good standing, competent and properly regulated.  If your beneficial interest in shares in a Gibraltar company is held by nominees, be sure to keep originals or certified true copies of your nominee agreements in a safe place and to have a Gibraltar will, such as will allow your next of kin to claim ownership given that mere directions to nominees are insufficient to allow them to claim under Gibraltar testamentary law.

 

If you think that any of the above might affect you, feel free to contact me and I shall be happy to help.


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