Damages claim against struck off company

When a company is no longer needed one option is to have it dissolved via a simple process of asking the Registrar to dissolve the company. This is a fairly straight forward and costs effective method to close a company that has not traded for 3 months or more. However, the directors must be aware that potential claims against the company can lead to a creditor applying to have the company restored to the register in order to commence proceedings including winding up.

By a recent decision the court has demonstrated that it is willing to assist potential creditors where a company has been dissolved after it became aware of a potential claim against it.

In this case, the court ordered that the period during which the company was dissolved would not count for limitation purposes where the company which was being restored had previously been struck off the register of companies.

The claimant was looking to bring a claim for damages for professional negligence against the company. The claimant wanted to have the company wound up so that a liquidator could look into clawing back assets distributed in the 2 years prior to its dissolution and persuaded the court that the period between dissolution of the company and the order for restoration would not count for limitation purposes.

As the company’s assets had been transferred back to the shareholders prior to dissolution and this had taken place more than 2 years previously the claimant also persuaded the court to backdate the date of his petition to wind up the company to the date of dissolution of the company. This established a position where the transactions which had taken place in the 2 years prior to dissolution could be looked at and potentially recovered to cover the damages claim.

As is demonstrated by this decision, whilst dissolution is an easy option when it comes to closing an inactive company care should be taken to consider any potential claims against the company particularly if there is a distribution of assets within the 2 years before the dissolution of the company.