Q&A: The effect of the dissolution of a management company named in a lease

Bona vacantia is the principle under which on dissolution of a company, all property and rights that were vested in it immediately prior to the dissolution become vested in the Crown. The exception to this is in respect of rights which the company held on trust for another entity.

Contractual rights the company had the benefit of will pass to the Crown bona vacantia. It is important to note however, that if the company’s last registered office was in Lancashire, most of Merseyside, and parts of Greater Manchester, Cheshire and Cumbria then the Duchy of Lancaster takes the place of the Crown, while in Cornwall the Duchy of Cornwall fulfils the Crown’s role.

On the basis that the manager, is a management company under the terms of the lease, in this case, the rights of the manager will pass to the Crown pursuant to the provisions of section 1012 of the Companies Act 2006 (CA 2006), though the obligations the manager was subject to will not. This is because while the Crown takes on rights and property owned by the company prior to its dissolution it does not take on its obligations.

In practice it is likely that the Crown would disclaim any interest in the lease, as it would likely struggle to sell the rights of the manager under the lease and the Crown will not wish to get involved in the management of the property. For further guidance, see Disclaimer, dissolution and bona vacantia—overview.

That would leave the other parties to the lease in a difficult position, which would be best resolved by trying to get the management company restored to the register of companies before the Crown disclaims its rights. The Crown may not be aware that the rights of the manager have become vested in it, and so may not have taken any action to disclaim its contractual rights. For further information, see Practice Note: Company restoration—restoration by court order.

If the company is restored to the register and the Crown has not disclaimed or sold the rights which had accrued to it, then they will re-vest in the company, as CA 2006, s 1032 states that the 'general effect of an order by the court for restoration to the register is that the company is deemed to have continued in existence as if it had not been dissolved or struck off the register'. The manager will therefore have the same rights and responsibilities as it had before the dissolution.

It is also important to check the terms of the lease if advising a landlord or tenant who are also a party to the lease because the lease may contain a provision requiring a landlord to step in and perform the manager’s covenants under the lease in the event that the manager is dissolved.

This content was first published on the Lexis Nexis Ask Forum on 3 September 2020. For more information, please contact Oliver Park or your usual Charles Russell Speechlys contact.