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Mortgage charge on dissolved company

What happens to a registered charge when a company is struck off?

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Perhaps more of a legal than accounting matter but I am intrigued by the scenario. A client is owed money by a company that has been dissolved by Companies House for non filing, so he won't get paid. But it appears the business premises on which there was a mortgage charge were in the name of the company. Now we all know that when a company is struck off its assets become property of the crown, but where does the mortgagor stand (lets keep it simple and assume there are no personal guarantees)? Does the charge die with the company? If it does, can he apply to the Crown and they will either restore the company to allow the charge to be exercised, or sell the property and pay off the mortgage? Or is it tough you know what for the mortgagor who should have spotted the Gazette notice of the strike off and objected at the time?

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RLI
By lionofludesch
23rd Aug 2017 15:15

Your client needs to have the company restored.

Did he not object to the striking off ?

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By PracticePartner
23rd Aug 2017 15:55

He's more of a Sun reader than a Gazette reader! And it isn't a lot of money. The question is about what happens to the charge. Is the mortgage inexorably linked to the property and if so is it valid even though the property is now owned by the Crown?

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Replying to PracticePartner:
RLI
By lionofludesch
23rd Aug 2017 16:06

No, the charge is still his.

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By PracticePartner
23rd Aug 2017 17:23

Well strictly the charge is on the asset, so could he do anything with it?

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RLI
By lionofludesch
23rd Aug 2017 17:34

He can if the company's reinstated. The Queen will give it back. She probably had no use for it anyway.

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By SteveHa
24th Aug 2017 13:39

Dunno, isn't that how they got Balmoral?

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Hallerud at Easter
By DJKL
23rd Aug 2017 16:16

This is an interesting read re the topic from Eversheds:

http://www.eversheds-sutherland.com/global/en/what/articles/index.page?A...

"ASSETS ON DISSOLUTION

Pursuant to s 1012(1) of the Companies Act 2006 (CA 2006), when a company is dissolved its assets are deemed bona vacantia. Title passes to the Crown and the assets are dealt with by the Treasury Solicitor. Practitioners should read the Government’s guidance paper on bona vacantia property for a good overview (BVC1). Significantly, the rules in relation to a mortgagee seeking to sell bona vacantia property under a power of sale changed from 1 July 2015, cutting down the Treasury Solicitor’s involvement in such a sale to rare cases where there is a possibility of a surplus returning to the Crown. Although this simplifies things in relation to a sale (cutting out correspondence with the Treasury Solicitor), a client would be well advised to use the checklist of information which the Treasury Solicitor previously required (reputable valuation, certificate of debt etc), which are good practical steps, as a matter of good practice.

ASSET REALISATION

If a lender identifies an asset of value, the first question it will ask is how best to realise that asset. The second will be how much that method will cost. The first option most will consider is an application to court under s 1029 of the CA 2006. However, while an uncontested application can be relatively inexpensive, the lender is then reliant upon either an appointment of a liquidator to realise assets and make a distribution, or upon the actions of directors who may have already permitted the company to be dissolved. If the intention is merely to realise property owned by the company (rather than use the company to pursue claims which may fall within a floating charge), it may be more cost effective to exercise a power of sale, or apply for an order vesting the property in the lender.

WHAT HAPPENS NEXT?

Pursuant to ss 1013 to 1022 of the CA 2006, the Crown has the right to disclaim any property of the dissolved company. Whether the Crown goes on to exercise that right will depend on a number of factors (again see BVC1). Below we consider the alternatives for disclaimed and nondisclaimed property."

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Replying to DJKL:
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By PracticePartner
23rd Aug 2017 17:47

Interesting, thanks. It reads as if the mortgagee has to approach the Treasury Solicitor to obtain their consent, otherwise a conveyance couldn't take place, because the Crown now owns the property.

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