The High Court has ruled that a will made by an elderly woman with dementia, in which she...
A recent High Court decision has highlighted the risks of property ownership through a company and the consequences when that company is dissolved. A couple, who were both directors and shareholders of a company that had owned a freehold property, have been unsuccessful in their bid to secure a vesting order after the company was struck off and the property reverted to the Crown.
The company purchased the freehold in 2005 for £60,000. The property was divided into two flats, with the couple acquiring leases over both. However, after failing to file annual returns, the company was dissolved, a fact the couple claimed they were unaware of. By the time they discovered this, the six-year limit for restoring the company to the register had expired.
They applied to the High Court for a vesting order under Section 1017 of the Companies Act 2006 or alternatively under Section 181 of the Law of Property Act 1925.
No Legal Interest in Freehold
The Court ruled that being shareholders or directors of the company did not give the couple a direct interest in the property’s freehold. Their leases gave them certain rights and obligations, but these were not sufficient to justify transferring the freehold to them. The value of the freehold had also likely increased significantly since the purchase, while the leases had reduced in term by 20 years.
Under Section 181 of the Law of Property Act, the Court found that the couple held no subsisting legal right to the property at the time of dissolution. To treat the company’s property as theirs simply because they were shareholders would require piercing the corporate veil, which the Court deemed unjustified.
Key Legal Takeaway
The Court dismissed the application, acknowledging the practical difficulties faced by shareholders in such cases but confirming that statutory powers do not extend to vesting property rights in individuals who hold no legal interest.
This decision underscores the importance for company directors to ensure corporate compliance, particularly in filing annual returns, to avoid the loss of valuable property assets.