We all know what is likely to happen to our possessions when we die. Fortunately there is no inheritance tax in Jersey, so our heirs do not have to worry about the taxman taking a cut, but what happens to the assets of a Jersey company which has been dissolved? Unless those assets have been distributed to the company's shareholders (or creditors if it was wound up in an insolvent situation), there is no heir to whom those assets will obviously pass, unlike in the case of a deceased individual.
There are several reasons why a Jersey company may be dissolved – for example, at the end of its prescribed life, in the course of a normal winding up or through the actions of the Jersey companies registrar for failure to submit an annual return or, as of recently, failure to have a properly authorised registered office. Jersey law is fairly straightforward when it comes to what happens to ownerless assets and the position is similar to the common law England in this regard; freehold Jersey immovable property (i.e. real estate) "escheats" to the Crown as Jersey's land law is based on feudalism and therefore on a system of tenure whereby a freeholder does not own absolutely but is a "tenant in fee simple" and, as such, land reverts to the Crown once the freeholder dies without any heirs (or, if the freeholder is a company which is dissolved, if it has not distributed the land). In respect of movable property (i.e. non-real estate), such assets become "bona vacantia" (Latin for "ownerless goods") and the Crown can claim them by virtue of the Royal Prerogative at customary law. The Crown's representative in Jersey is Her Majesty's Receiver General (the "Receiver General") and is appointed by the monarch to administer the Crown's estate in Jersey and receive or claim any property that has escheated to the Crown or which is bona vacantia. Theoretically the Receiver General could claim property situated outside of Jersey which falls to be bona vacantia although, in practice, this is unlikely to happen as the authorities in the jurisdiction where the property is located may have a better claim over it.
If a Jersey company is dissolved, a shareholder (or anyone else with an interest) will have a 10 year period from the date of dissolution within which to apply to the Royal Court in Jersey to have the company reinstated in order to reconstitute their interest in the company. If successful in their application, the company will be restored to the exact same position as it was prior to dissolution. In the event that that company held property which was subsequently claimed by the Receiver General, the interested party can apply to the Receiver General to recover those assets representing their interests. Furthermore, it is generally considered that there is no time bar on beneficial owners of a dissolved company being able to claim assets directly from the Receiver General.
Reclaiming assets from the Receiver General is a fairly well trodden path - but what happens when corporate shareholders of a dissolved or about to be dissolved company have themselves been dissolved? What is a Jersey company administrator to do with an inactive but solvent company which they wish to dissolve if there is no-one to distribute property to in a winding up or if it is impossible to wind up the company due to lack of live shareholders? Although this seems like a hypothetical situation, the Royal Court recently considered such a case and made an order involving the Receiver General.
In the recent case of In the matter of 15 Minories Holding Limited  JRC 108A, in which Walkers represented the corporate directors of the company, the Royal Court ordered the just and equitable winding up of a Jersey registered company where the company's substratum had gone, but without sufficient shareholders being in existence in order to resolve that the company be wound up in either a summary or a creditor's winding up (due to the fact that one of its three corporate shareholders had been struck off the Cayman register of companies in 2006 and another had been dissolved in 2005). It was considered that the directors allowing the company to be simply struck off under Article 205 of the Companies (Jersey) Law 1991 (as amended) would have been inappropriate from both a legal and regulatory perspective.
The case is one of the few occasions in which the Royal Court has considered the destination of assets of a dissolved company where the shareholder who would have had an entitlement to those assets on a winding up is no longer in existence. The Royal Court acknowledged that in such circumstances movable assets fall to the Crown as bona vacantia, but added that they will only vest in the Crown absolutely after the lapse of 10 years (on the basis that the company might be reinstated within 10 years of dissolution). In the interim, the Court ordered that the funds in question were to be held by the Receiver General who indemnified the corporate directors of the company thus absolving them of liability.
The case is noteworthy in showing the flexibility of a just and equitable winding up as there was previously no precedent for the unusual orders sought by the corporate directors (particularly those involving the Receiver General). This judgment will come as welcome news to company directors and administrators who will no longer have to maintain a dormant company simply because of shareholders that have been either dissolved or struck off the relevant register of companies. Although the corporate directors could simply have allowed the company to be struck off (e.g. by failing to submit an annual return), such a course of action would have been inappropriate not only because the corporate directors were regulated by the Jersey Financial Services Commission but also because it would have rendered the company under the Companies (Jersey) Law 1991 (as amended) (and therefore also the directors by virtue of the Criminal Offences (Jersey) Law 2009 (as amended)) guilty of an offence. Further, in the event that the company was struck off the register, the liability of every director will have continued and may have been enforced as if it had not been dissolved. In ordering the just and equitable winding up of the company and in ordering that funds be paid to the Receiver General, the corporate directors were protected from future claims.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.