Applications to restore are sought for various reasons, including where a company has continued to own assets despite being voluntarily struck off, or where a company has continued to trade in circumstances where it was struck off for failure to file its annual validation.
This memo provides a summary of the steps for restoring a company to the register.
Strike off
In Guernsey, a company can be struck off the register of companies either on a voluntary or compulsory basis. A voluntary strike off will be upon the application on the company itself, asking to be removed from the register. In contrast a compulsory strike off will happen either where the company is defunct, meaning the Companies Registrar has reasonable cause to believe that a company is not carrying on business or is not in operation, or where the company is in default in relation to certain statutory or legal obligations.
Upon being struck off the register, whether a voluntary or compulsory strike off, the Guernsey company loses its legal personality and thus ceases to exist. All the property of a struck off company becomes bona vacantia and so belongs to the Crown.
Application to the Court
The overwhelming majority of applications for restoration are made directly to the Royal Court pursuant to Section 370 of the Companies Law. The struck off company itself or any director, member or creditor thereof (this includes a contingent or prospective creditor) may apply to the Court for an order restoring the company to the register. An application under this section must be made before the expiry of 10 years beginning on the date on which the company was struck off.
An application for restoration to the register made by a company that, in the opinion of the Companies Registrar, has been in persistent and gross contravention of the Companies Law, will be unsuccessful as the Court will not grant such a company's application.
Notice of an application must be served on various parties, with exactly whom depending on the circumstances of the strike off. His Majesty's Procureur must always be notified and given an opportunity to make representations as to whether they raise any objections to the company being restored. Similarly the Companies Registrar must be given notice of the intention to apply for restoration to the register and they will be asked to confirm whether they raise any objections to the restoration. In certain circumstances notice of the application will also need to be served on the Guernsey Financial Services Commission, the Director of the Revenue Service, a liquidator, administrator, administration manager or any other person appearing to the Court to have sufficient interest in the application being made. Before making an order for the restoration of a company, the Court will give the relevant persons an opportunity to make representations.
The Court may make an order restoring a company to the register if it is satisfied that the company was, at the time of its striking off, carrying on business or in operation, or otherwise that it would be just and equitable for the company to be restored to the register. The Court has a discretion whether or not to make an order restoring a company to the register. In exercising its discretion, the Court must consider certain factors as set out in the Companies Law, including:
- whether or not the company would satisfy the statutory 'solvency test' if restored, unless the application for restoration is made by a creditor;
- whether the persons who were directors at the time the company was struck off consent to being directors if the company is restored;
- the circumstances in which the company was struck off;
- whether there were persistent or gross violations of Guernsey companies legislation;
- whether the company was used for fraudulent purposes;
- whether restoration to the register would jeopardise the reputation of the Bailiwick of Guernsey as a financial centre; and
- whether it would be just and equitable to restore the company to the register.
There is no fixed time period within which an application to restore a company will be adjudicated and an order made. However, provided the affidavit supporting the application is sufficiently comprehensive, it usually takes about two to three weeks for the Companies Registrar and HM Procureur to provide their respective consents. Upon receipt of these consents the court application can be made by lodging the application at the next non-contentious court (which sits on Thursdays). The application is generally dealt with on the papers.
If the Court is minded to make an order restoring the company to the register, the restoration is usually conditional upon the payment by the applicant to the Companies Registrar of all sums which would have been payable by the company if it had not been struck off. This includes the annual validation fee for each year in the period during which the company was struck off. The applicant is also required to pay certain costs, the usual costs being:
- those incurred by HM Procureur in connection with the striking off or the application for restoration. This usually relates to the preparation and sending of a letter by HM Procureur confirming no objection to the application (currently £493);
- the restoration fee payable to the Companies Registrar (currently £1,500); and
- Court fees (application and affidavit) (currently £365).
In addition to the expenses relating to the court application, an allowance should be made for the costs of engaging a professional corporate service provider to provide services, such as registered agent and/or directors, upon the company's restoration to the register.
The Court can make such additional directions as it sees fit in order to place the company and all other persons in as close to the same position, as reasonably possible, had the company had not been struck off. The Court also has power to grant additional directions in relation to costs.
Once a company is successfully restored, it is deemed to have continued in existence. Upon restoration, and subject to any different order of the Court, the company is entitled to have returned to it any property which vested in the Crown upon the company being struck off (or its value thereof if the property has been disposed of), provided the company is restored within six years of being struck off. The Court has discretion to extend this six year period.
Application to the Registrar of Companies
While generally companies are restored via the Court application route, there are exceptional circumstances where the Companies Registrar may, subject to such terms and conditions as they think fit, restore a struck off company to the register. This restoration might be either at Registrar's own initiative or at the request of the company or any director, member or creditor. The restoration will happen only if the Registrar is satisfied that:
- the company was struck off in error or in circumstances in which it should not have been struck off;
- an application to the Court for the restoration of the company would be successful but is not necessary for the fair disposal of the matter; and
- the restoration of the company to the register would not prejudice any creditor or third party.
In practice, the Registrar interprets the requirement in paragraph 1 above very narrowly and will generally only exercise their discretion to restore where an error has been made on the part of the Guernsey Companies Registry. As the requirements in paragraphs 2 and 3 above must also be met for the Registrar to exercise their discretion, it is very rare that a struck off company is able to satisfy all three limbs of the test.
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