Re Birchwell Developments Ltd

• Jurisdiction: Ireland
• Judge: Miss Justice Laffoy
• Judgment Date: 23 July 2010
• Neutral Citation: [2010] IEHC 319
• Docket Number: [No. 332 COS/2010]
• Court: High Court
• Date: 23 July 2010

[2010] IEHC 319

THE HIGH COURT

[No. 332 COS/2010]

Birchwell Developments Ltd (In Voluntary Liquidation), In Re

IN THE MATTER OF BIRCHWELL DEVELOPMENTS LIMITED (IN VOLUNTARY LIQUIDATION)

AND

IN THE MATTER OF S. 131 OF THE COMPANIES ACT 1990

COMPANIES ACT 1963 S256

COMPANIES ACT 1963 S143

COMPANIES ACT 1990 S128

COMPANIES ACT 1990 S128(1)

COMPANIES ACT 1990 S128(2)

COMPANIES ACT 1990 S128(3)

COMPANIES ACT 1990 S128(4)

COMPANIES ACT 1990 S128(11)

COMPANIES ACT 1963 S266

COMPANIES ACT 1963 S266(1)

COMPANIES ACT 1963 S266(2)

COMPANIES ACT 1963 S266(3)

COMPANIES ACT 1990 S131

MCCANN & COURTNEY COMPANIES ACTS 1963-2006 2008 ED 1267

CENTREBIRD, IN RE LTD 1967 1 WLR 377

COMPANIES ACT 1963 S131(2)

COMPANIES ACT 1963 S276

COMPANIES ACT 1963 S266(4)

COMPANIES ACT 1963 S266(5)

COMPANIES ACT 1963 S266(6)

COMPANIES ACT 1963 S256(11)

COMPANIES ACT 1963 S256

COMPANIES ACT 1963 S258

COMPANIES ACT 1963 S280

COMPANIES ACT 1963 S280(2)

COMPANIES ACT 1963 S280(3)

OAKTHORPE HOLDINGS (IN VOLUNTARY LIQUIDATION), IN RE 1987 IR 632

FAVON INVESTMENT CO LTD (IN LIQUIDATION), IN RE 1993 1 IR 87

COMPANIES ACT 1963 S131(5)

COMPANY LAW

Winding up

Members voluntary winding up - Failure to deliver required statutory declaration of insolvency to Registrar of Companies within time - Application to redress failure to comply with statutory pre-condition to members voluntary winding up - Power of liquidator or contributory to apply to court to determine any question arising in winding up - Broad discretion of court - Purpose of legislative provisions - Protection of creditors - Re Centrebind Limited [1967] 1 WLR 377; Re Oakthorpe Holdings (In voluntary Liquidation) [1987] IR 362 and Re Favon Investment Co Ltd (In liquidation) [1993] 1 IR 87 considered - Companies Act 1963 (No 33), s 256 - Application adjourned to allow parties consider observations and amend application (2010/332COS - Laffoy J - 23/7/2010) [2010] IEHC 319

Birchwell Developments Limited, In re

Miss Justice Laffoy

1 2 1.1 This is the second occasion during this term on which I have been faced with an application which is designed to redress the failure to comply with the provisions of s. 256 of the Companies Act 1963 (the Act of 1963) in relation to a members' voluntary winding up, in particular, the failure to deliver the required statutory declaration of solvency to the Registrar of Companies not later than the date of the delivery to the Registrar of a copy of the resolution for the winding up of the company, which, in accordance with s. 143 of the Act of 1963, requires to be delivered within fifteen days of the passing of the resolution.

2 3 1.2 Before dealing with the facts underlying this application and how the problem should be redressed, I propose outlining what I consider to be the relevant provisions of the Companies Acts and the relevant authorities.

3 2 2.1 Section 256 of the Act of 1963 in its current form was substituted by s. 128 of the Companies Act 1990 (the Act of 1990). A pre-condition to a members' voluntary winding up of the company is the making of a statutory declaration to the effect that the directors have made a full inquiry into the affairs of the company, and that, having done so, they have formed the opinion that the company will be able to pay its debts in full within a period not exceeding twelve months from the commencement of the winding up (sub. (1)). Sub-section (2) deals with when the statutory declaration of solvency should be made and delivered to the Registrar of Companies and what it should contain. It provides that it should be accompanied by a report made by an independent person in accordance with the provisions contained in subs. (3) and (4). Sub-section (11), insofar as is relevant for present purposes, provides:

"A winding up in the case of which a declaration has been made and delivered in accordance with this section is in this Act referred to as a 'members' voluntary winding up' and a voluntary winding up in the case of which a declaration has not been made and delivered as aforesaid … is in this Act referred to as 'a creditors' voluntary winding up'".

4 3 2.2 Section 266 of the Act of 1963 is one of the provisions therein applicable to a creditors' voluntary winding up by virtue of s. 265. Sub-section (1) requires the company to cause a meeting of the creditors of the company to be summoned for the day, or the day next following the day, on which there is to be held the meeting at which the resolution for the voluntary winding up of the company is to be proposed, and that the creditors be notified of the meeting by post at least ten days before the date of the creditors' meeting. Sub-section (2) requires that the company advertise the creditors' meeting at least ten days before the date of the meeting once at least in two daily newspapers circulating in the district where the registered office or principal place of business of the company is situated. Sub-section (3) requires that the directors of the company lay a statement of affairs and a list of creditors before the creditors' meeting and appoint one of their number to preside at the said meeting.

5 4 2.3 Section 131 of the Act of 1990 applies where, in the case of a creditors' voluntary winding up, a liquidator has been nominated by the company. As is pointed out in the annotations in McCann and Courtney on Companies Acts 1963 - 2006:2008 Edition (at p. 1267), the purpose of s. 131 was to reverse the effect of the decision in Re Centrebind Limited [1967] 1 WLR 377, where it had been held that the person appointed as a liquidator by the members had been validly appointed and had power to act in the liquidation and to realise and deal with the assets despite the fact that no creditors' meeting had ever been held. As the editors point out, a practice had thus developed of holding a members' meeting and appointing a "friendly" liquidator who would not investigate or pursue the directors and who would be in a position to transfer the company's assets on advantageous terms to a new entity established by the directors. Sub-section (2) of s. 131 provides that the powers conferred on the liquidator by s. 276 of the Act of 1963 shall not be exercised, except with the sanction of the court, during the period before the holding of the creditors' meeting under s. 266 of that Act, subject to certain exceptions designed to preserve the assets of the company which are set out in subs. (3). Sub-section (4) requires that the liquidator shall attend the creditors' meeting and shall report to the meeting on any exercise by him of his powers. Sub-section (5) provides as follows:

"If default is made -"

6 (a) by the company in complying with subsection ( 1) or (2) of section 266 of the [Act of 1963], or

7 (b) by the directors in complying with subsection (3) of the said section,

8 the liquidator shall, within 7 days of the relevant day, apply to the court for directions as to the manner in which that default is to be remedied."

9 In subs. (6) the "relevant day" is defined as meaning the day on which the liquidator was nominated by the company or the day on which he first became aware of the default, whichever is the later.

10 5 2.4 For present purposes I am assuming that s. 131 has application to a deemed creditors' voluntary winding up by virtue of s. 256(11) of the Act of 1963, although in such a winding up the company has purported to appoint a liquidator under the power contained in s. 258, rather than merely nominate a liquidator.

11 6 2.5 Section 280 of the Act of 1963 confers on the liquidator, or any contributory, or any creditor of a company in liquidation power to apply to court to determine any question arising in the winding up. Sub-section (2) of s. 280 gives the court a very broad discretion on such an application. The only condition is that the outcome should be "just and beneficial". Sub-section (3) provides:

"An office copy of an order made by virtue of this section annulling the resolution to wind up or staying the proceedings in the winding up shall forthwith be forwarded by the company to the registrar of companies for registration."

12 7 2.6 In In re Oakthorpe Holdings (In Voluntary Liquidation) [1987] I.R. 632, an application under s. 280 to annul a resolution that Oakthorpe Holdings, an unlimited company which had never traded and had no creditors, be voluntarily wound up and appointing the applicant as liquidator was considered by the High Court. The context was the failure of the company to make and deliver to the Registrar of Companies the statutory declaration of...