Recovering Assets After Company Dissolution: How Vesting Orders Can Help Beyond the 6-Year Time Limit

When a company is dissolved, all its property and rights (apart from property held by the company on trust for another person) are deemed bona vacantia. Bona vacantia means 'ownerless goods'.

In England and Wales, any property or rights deemed bona vacantia are owned by the Crown or the Duchy of Lancaster or Cornwall, depending on where the company's office was registered.

The Crown can disclaim (give up) its title to any property that is deemed bona vacantia.

If that happens, the property will escheat to the Crown Estate. Escheat is where the freehold land that the Crown has disclaimed passes to the Crown Estate.

The Crown Estate is the ultimate owner of all land, and the purpose of escheat is to ensure that no freehold land is without an owner.

The Crown Estate is a separate part of the Crown (that which deals with bona vacantia property).

Companies that own assets are regularly dissolved, voluntarily or by way of strikeoff, for various reasons, including failing to file accounts.

The issue usually arises soon after the dissolution, and it can be rectified relatively easily by restoring the company to the Register of Companies.

If the issue does not come to light until after the 6-year time limit to restore the company has already passed, people often assume the asset is now lost.

This can be a problem if rents are collected from the property/land.

Fortunately, there is a lesser-known alternative route to recovering the asset, known as a vesting order.

What is a Vesting Order?

In a vesting order application, the applicant applies to the court for an order vesting the property of a dissolved company into the applicant's name.

There are several different statutory routes through which the court can be asked to make such an order, but for the purposes of this article, we focus on applications under section 181 of the Law of Property Act 1925 (LPA 1925) and section 44 of the Trustee Act 1925.

Under section 181 of the LPA 1925, the court can create a corresponding estate in land and vest the same in the person who would have been entitled to it had the company not been dissolved.

Section 44 of the Trustee Act 1925 also gives the court power to vest the dissolved property or land in a new trustee's name when a corporate trustee originally held the legal title.

These are complex concepts, and many people will assume the above does not apply to them as the company did not formally hold the land or property on trust.

However, in the fairly recent case of Dixon v Crown Estate Commissioners [2022] EWHC 3256 (Ch), the court extended the categories of equitable interests, enabling a vesting order to be made to rights through proprietary estoppel.

Proprietary estoppel arises when one party makes a representation about the ownership of property and the other acts to their detriment in reliance on the representation. The representation need not be expressed; it can be a common assumption.

What this means in practice is that it is possible to argue that there was a common assumption between the company and its member(s) that the land was held on trust for, or owned, by the member(s).

The members acted to their detriment by dissolving the company or allowing it to be dissolved.

They would not have done this had they known the company still owned the land or property.

Other detriments, such as taxes paid on the land or property or investment and maintenance, may well be shown.

In such circumstances, it is arguably unconscionable for the Crown or the Crown Estate to benefit from what was a mistake.

If the court agrees, it has the power to vest title in the member(s). However, it is important to note that under the Trustee Act, a court must exercise its power to do justice in all circumstances.

This means the court is not restricted to awarding the interests in accordance with the shareholding at the time of dissolution.

It is also important to note that as court proceedings are required, vesting orders will cost substantially more than a standard company restoration.

That said, the alternative is losing or purchasing ownership of the land, generally at full open market value, which is discussed further below.

Where the time limit to restore the company has passed, the other option to consider is to purchase the land/property.

If the Crown owns the land and has not yet disclaimed it, it may be possible to purchase it.

The Crown generally do not sell to individuals, and it may be sold at auction.

The Crown may also ask you to pay for a valuation, and even if you do so, they are not guaranteed to sell to you.

Instead, they may still sell at auction or disclaim the land. You will also be liable for their legal fees if you purchase from the Crown.

If the land/property is disclaimed, the Crown Estate may consider selling it.

It does not have to do so and can hold the title as long as it wishes. The Crown Estate can sell to a specific buyer, but it will only do so if it considers it appropriate and where it can obtain the best fair and reasonable price.

The Crown Estate must obtain the best price it reasonably can as it accounts to the Treasury.

Therefore, any proceeds benefit the public purse. Any purchaser will also need to pay the Crown Estate's legal costs, including the cost of a market appraisal if needed.

Given that the Crown or the Crown Estate will attempt to achieve full open market value (or as close as possible to it), this is often an undesirable choice for most clients unless any application for a vesting order fails.