Thursday, May 10, 2012

Companies House – it has finally happened! – the revenge of Companies House!

In our Blog dated 2 April we told you about the judgement in Globespan Airways Ltd, where Mr Justice Briggs held that Companies House should use the date it receives the Form 2.34B as being the date of the cessation of the Administration and the commencement of the CVL. Companies House are appealing the decision, and unfortunately, in the interim have decided to ignore the judgement. As a result, they are continuing to apply their old policy whereby the key date is the date that they register the Form 2.34B, i.e. the date that they have processed it following receipt. This means that we are back to the position we were in before the case was decided. You must continue to factor in time for the Registrar to process the Form 2.34B when one is submitted near to the date the Administration ends automatically, and our comments in our Blog dated 16 February still apply.

 Are we the only ones who find this all very unsatisfactory? Whilst legislation is drafted by Parliament, it is interpreted by the Courts. Here the policy intention may have been for the date of cessation of the administration to be the date the Form 2.34B was processed by Companies House, or when the legislation was drafted it may have been assumed that Companies House would process the form without delay and the wording was used to facilitate this. The wording of the legislation does not make that clear and so far it has been interpreted by the Courts to mean that the administration should end when the form is received by the Registrar. This could have a significant benefit for IPs and other stakeholders if it allows you to use the deemed service provisions to be certain of the closing date of an administration. You will be able to prepare notices, finalise administrations and open any subsequent insolvency procedures without the uncertainty that currently exists.

We consider that if a Court has interpreted the legislation in a particular way then that is binding until the same issue is considered by a higher level Court. Despite this, Companies House are ignoring the decision, and we think that it is particularly inappropriate for a Government Agency to take such an approach.

The position has actually been made even more uncertain as a result of an article about Globespan Airways Ltd that is on the Companies House web-site. After indicating in the article that the Registrar will ignore the Court decision and continue to use the date of registration of the Form 2.34B as the date of conversion from administration to CVL, it goes on to say - “We will accept a Form 600 (Notice of Appointment of Liquidator), in cases where the company is converting from administration to creditors voluntary liquidation, after the submission of a Form 2.34B and giving a date of appointment that is the date of receipt or registration. The reason for this is that the Registrar would not wish to reject a properly delivered filing (as defined by s. 1072 of the Companies Act 2006) during this period of uncertainty.”

In other words you can chose which date you want to use as the date of conversion, either the date of receipt of the Form 2.34B, or the date of its registration! That is just bizarre! The article goes on to say that once the appeal has been heard then “… it may be that alterations will need to be made to the Register and the Registrar’s processes, and a full review will take place at that time.” That seems to be suggesting that the Registrar may retrospectively make changes to the date of conversion where the date used does not accord with the date that should have been used according to the Court of Appeal decision. If the decision of Mr Justice Briggs is upheld then all conversion dates since the date of his judgement will be incorrect and need adjusting since Companies House are not changing their policy. If, however, you decide to take Companies House up on their offer and submit a Form 600 using the date of receipt of the Form 2.34B as the date of conversion, then if the judgement is in fact overturned, all the dates of conversion for your cases will be incorrect.

So what should you do? Whilst it is clearly your choice, the lesser of the two options appears to be to follow the old Companies House approach and continue to use the date of registration of the Form 2.34B as the date of conversion. This flies in the face of Mr Justice Briggs’s ruling, but is less likely to cause disruption for now. If, however, that will means that there is a gap between the cessation of the administration and the commencement of the CVL then you should consider using the date of receipt. Bear in mind though that if the judgement is in fact overturned you would probably need to make your own application to Court to enable you to continue to use the date of receipt. If in fact the original judgement is upheld there may be so many cases with incorrect dates that Companies House will make a policy decision not to make any retrospective changes. If changes are made then that will create a nightmare for IPs as all dates on IPS and in gazette notices and potentially annual progress reports will be incorrect.