How To Restore A Struck Off LLP After Liquidation

The case of A & Anor v Registrar of Companies (Re Prudencia LLP) [2024] EWHC 3255 (Ch) explains how to restore a struck off company after liquidation. 

The company in this case is a Limited Liability Partnership (“LLP”) called Prudencia LLP that went into Members Voluntary Liquidation and then dissolved on 7 March 2017.

It was a successful appeal from a first instance decision by individuals referred to as A and B (individuals). B was a former member of the LLP. The application to restore the LLP was successful because of two key issues: standing and the threshold test for restoration being satisfied.

The LLP had two designated members, both of which were companies registered in Cyprus and both dissolved.

The LLP Structure

At dissolution one of the members (CompanyX) had been absorbed into another Cypriot company (Company Y that was beneficially owned by A) and the other remaining one owned 4.96% of the assets of the LLP. This was labelled Company Z which was recorded as held on trust for an individual called A.

The issue was that Companies X, Y and Z all were dissolved and could not be reinstated due to limitation issues under Cypriot law.

The judge of first instance said the LLP if restored to Companies House would mean there would be no member capable of being brought back into existence to liaise with a liquidator.

Desire For Restoration

The desire to restore is that A and B which the LLP to pursue legal claims arising from a settlement agreement issue in 2012 that they became aware of in 2019.

Under Cypriot law A had the residual interest in Companies Y and Z, not passing a bona vacantia as would be the case in the UK.

Standing Of Application To Restore An LLP

B was a former member of the LLP the application under Section 1029 of the Companies Act 2006 as modified for LLPs under Regulation 57 of The Limited Liability Partnerships (Application of Companies Act 2006) Regulations 2009 that individual had standing to make the application.

However, the Court went further and determined that A would be able to liaise with the liquidator:

I am fortified in that view by matters referred to by Mr Wolman in argument, in particular his point that the certain parts of the legislative scheme relevant to LLPs encourage an expansive and realistic view of the ownership of membership rights, which goes beyond looking at the name shown on the register. For example, the Limited Liability Partnerships (Accounts and Audit) (Application of the Companies Act 2006) Regulations 2008 (SI 2008/1911), in dealing with the concept of parent and subsidiary undertakings, provide by means of an amended s. 1162 Companies Act 2006 and Schedule 7, that “Rights held by a person in a fiduciary capacity shall be treated as not held by him” (Sch. 7, para. 6), and “Rights held by a person as nominee for another shall be treated as held by the other” (Sch. 7, para. 7(1)). The parallel with the present case may not be an exact one, but I accept that these provisions suggest a degree of elasticity in the statutory scheme when it comes to identifying who is the true owner of membership rights and entitlements.

Finally, what of the point the Judge appears to have found most persuasive, namely the practical issue referenced in para. [17] of her Judgment that “there would be no existing member who would be able to liaise with the liquidator”? Here, I think Mr Wolman is correct that the language of s.1032(3) provides the flexibility required to fashion an appropriate response (i.e., the power to give such directions or make such provisions as seem just for placing the LLP or “all other persons in the same position (as nearly as may be) as if the LLP had not been struck off”). Given the conclusions I have reached above as to the ongoing interests of A in realising the contingent value represented by the LLP’s prospective claim, it seems to me appropriate to direct that he should be entitled to liaise with the liquidator as regards the bringing of that claim. Given that the entities via whom his interests were held are no longer in existence, the effect will be to put him “as nearly as may be” in the same position he was in at the point of dissolution. It is impossible to restore the actual status quo ante; but that is the next best thing, and in my view the statutory language is sufficiently flexible to allow it to happen.

Test For Restoration Of A Company

The purpose of the restoration of a company was to serve its purpose under the legislation not do good or not do good.

Typically restoration is there to enable an overlooked asset to be distributed as explained by the Court:

A good starting point is to consider the relevant statutory purpose. This is illustrated by Re Oakleague Ltd [1995] BCC 921. There, an application was made to restore to the register a dissolved company, whose liquidator prior to dissolution had assigned to the company’s former director a cause of action against a third party supplier. In proceedings against the supplier, certain technical points arose about the validity of the assignment. On one view of it, the alleged deficiencies would be resolved by restoring the company to the register and joining it as a party. On other permutations, however, such restoration would make no difference to the outcome and so would probably serve no useful purpose (see p. 923H). An application for restoration was opposed by the supplier, but allowed by the Court. Robert Walker J concluded that it was not part of the test for restoration for the Court to need to be satisfied that the restoration would actually do some good or not (p. 924H). The Court only had to be satisfied that restoration would serve the general purpose of the legislation, which Hoffmann LJ had summarised in an earlier decision, Stanhope Pension Trust Ltd v. Registrar of Companies [1994] BCC 84 at p. 87D, as follows:

“I think it would therefore be nowadays more accurate to say that ordinarily the purposes of s. 651 are either to enable the liquidator to distribute an overlooked asset or a creditor to make a claim which he has not previously made.”

Robert Walker J described this as a “very useful and accurate statement” of the statutory purpose. At p. 924H, he summarised the position as follows:

“As often occurs in cases of this sort the restoration of the company to the register may do it some good or it may not. The attitude of the Companies Court is that provided the application for restoration falls within the general legislative purpose as I have described it the company will be restored, and whether the restoration does anyone any good or not is a matter to be decided by another tribunal in the future …”.

Applying that logic here, I think the LLP should be restored to the register. That is because, on the present evidence at any rate, there appears to be an overlooked asset, namely the potential claim for misrepresentation concerning the settlement agreement, which may generate returns for distribution. Restoration to the register is thus consistent with the relevant statutory purpose and, applying the language of s. 1031(1)(c), it is just to order it. Granted, there are many uncertainties, and it is far from clear that ultimately there will be any point in doing so; but the Court cannot resolve such matters at this stage, and they should be left for consideration by other tribunals in the future, to the extent necessary.