When a company is dissolved it ceases to exist as a legal entity, but what happens if it still owns property at that point?
In a dissolution, property vested in the company would usually be applied to its creditors and then its members so that at the point of dissolution no assets are owned. However it is not uncommon to find that the necessary action to transfer property to a company's creditors, or vest property in its members, has not occurred. There can be many reasons for this, for example:
- the company may have been removed from the register for failing to comply with company law without any steps having been taken by its directors to transfer its assets;
- the necessary formalities to transfer the asset may not have been completed; or
- the directors of the company may not have known of the assets or rights vested in the company or they may have been valueless at time of dissolution.
Where an Isle of Man incorporated company has been dissolved, all property and rights which vested in the company immediately prior to dissolution are deemed bona vacantia (ownerless property).
The law of the jurisdiction in which the relevant asset or right is situated will stipulate in whom bona vacantia property vests.
As a matter of Isle of Man law, property previously belonging to a now dissolved company and deemed bona vacantia, which is physically present in the Isle of Man or is a legal right governed by Isle of Man law vests in the Isle of Man Treasury on trust for the Crown.
By way of example:
- A company incorporated in a jurisdiction other than the Isle of Man which owns a piece of land in the Isle of Man, if dissolved still owning the land, the land will vest in the Isle of Man Treasury. The result would be the same if the company had been incorporated in the Isle of Man or if the assets in question were shares in an Isle of Man company.
- A company incorporated in the Isle of Man which owns land in England, if dissolved owning the land, the land vests as a matter of English law in the Crown (or Duchy of Lancaster or Cornwall dependant upon where the land is situated).
In most legal systems it is possible for the entity in which bona vacantia assets and rights vest (usually a state entity) to disclaim or sell them. Onerous property is perhaps most likely to be disclaimed. The Isle of Man Treasury gives the following as examples of assets it may disclaim:
- land used in common, such as private roads, service yards, amenity land or the common parts of an estate or block of flats;
- property subject to onerous covenants or other potential liabilities;
- property which is contaminated or has buildings, trees, or other items which are in a dangerous state and condition;
- property in negative equity;
- property subject to a dispute or competing claims;
- low value property; and
- commercial leases.
In respect of Manx property the original owner, the company, can claim the assets (or, if they were sold, the proceeds) back. In order to reclaim assets which have vested bona vacantia in the Isle of Man Treasury, it usually requires that the company is restored to the register of companies where this is possible. The property then automatically revests in the company as if it had never ceased to exist. As the company is restored to the register as if it had never ceased to exist, the company is liable for any sums due since its dissolution, for example outstanding rental and annual return filing fees (including late filing fees) at the Isle of Man Companies Registry.
Where the asset is located in another jurisdiction and was owned by a now dissolved Isle of Man company, it is also likely that the company will need to be restored to the register of companies in the Isle of Man, at which point the asset would (subject to any provision of the law governing the asset to the contrary) revest in the company.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.