CHAPTER 20 THE COMPANIES COURT
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Key Rules: PD 49 -- Applications under the Companies Act; PD -- Insolvency; Insolvency Rules 1986; Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1987; PD -- Directors Disqualification Proceedings
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| 20.1 |
The Companies Court is a part of the Chancery Division. Applications in the High Court under the Companies Act 1985Acts, the Insurance Companies Act 1982, the Financial Services and Markets Act 2002, the Insolvency Act 1986Acts in relation to companies registered in England and Wales, and the Company Directors Disqualification Act 1986, must be commenced in the Companies Court. Proceedings concerning insolvent partnerships, under the Insolvent Partnerships Order 1994, are also brought in the Companies Court (unlike proceedings against partners separately, which, if the partner is an individual, are brought in bankruptcy). Many other kinds of application are brought in the Companies Court. Appeals in Companies Court matters are dealt with in Chapter 10.
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| 20.2 |
Applications, other than in insolvency, are governed by the Civil Procedure Rules and PD 49 -- Applications under the Companies Act 1985Acts.
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| 20.3 |
Applications in insolvency relating to companies (and to insolvent partnerships) are governed by the Insolvency Rules and PD -- Insolvency Proceedings.
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| 20.4 |
Proceedings under the Company Directors Disqualification Act 1986 are governed by the Insolvent Companies (Disqualification of Unfit Directors) Proceedings Rules 1987 and the PD -- Directors Disqualification Proceedings.
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| 20.5 |
Proceedings in the Companies Court under a particular statute should be entitled accordingly, thus:
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"In the matter of [name and registration number of the company] And in the matter of the Companies Act 1985Acts [and of any other statute as appropriate]"
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"In the matter of [name of the relevant company] And in the matter of the Company Directors Disqualification Act 1986"
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"In the matter of [name of the debtor] And in the matter of the Insolvency Act 1986Acts [and of any appropriate order, such as the Insolvent Partnerships Order 1994]"
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| 20.6 |
The Companies Court has a separate administrative procedure. Proceedings are issued in the Companies Court General Office, and they are dealt with by the Registrars.
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| 20.7 |
Petitions for winding up, petitions for confirmation by the court of reduction of capital, and interim applications for directions in proceedings by shareholders are among the principal matters heard by the Registrars. A Registrar may direct that any case be heard by a judge even if it is a kind of application which would normally be heard by a Registrar.
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| 20.8 |
Certain matters such as applications for an administration order under Part II of the Insolvency Act 1986Acts, petitions for approval by the court of schemes of arrangement and applications for the appointment of provisional liquidators are heard by a judge. A judge is available to hear companies matters each day in term time, and applications to be heard by that judge may be listed for any such day. The judge will normally also be hearing the Interim Applications List for the day, but one or more other judges may be available to assist if necessary. The Registrar may refer or adjourn proceedings to the judge in accordance with the criteria set out in paragraph 19.4 above.
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Preparation for hearings before the Registrars
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| 20.9 |
Paragraphs 7.39 to 7.50 apply to hearings before the Registrars of the Companies Court. Skeleton arguments and bundles should be delivered to the Companies Court Issue Section.
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| 20.10 |
The statutory regime for administrations commencing on or after 15 September 2003, with certain exceptions, is found in the Insolvency Act 1986Acts, schedule B1, which should be read with the new Part 2 of the Insolvency Rules 1986. Administrations commenced before 15 September 2003 and administrations of certain bodies (building societies, insolvent partnerships, limited liability partnerships, certain insurers, and public utility companies listed in section 249(1)(a) -- (d) of the Enterprise Act 2002) continue to be governed by Part II of the Insolvency Act 1986Acts (or enacted before the introduction of Schedule B1) and the former Part 2 of the Insolvency Rules 1986. Administration creates a statutory moratorium and allows the affairs, business and property of the company to be managed by an administrator.
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| 20.11 |
Administrators may be appointed by the court or out of court. By paragraph 3(i) of Schedule B1 the administrator must perform his duties with the objective of:
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(1) |
rescuing the company as a going concern, or
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(2) |
achieving a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration), or
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(3) |
realising property in order to make a distribution to one or more secured or preferential creditors.
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Court Order
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| 20.12 |
An application to the court must be commenced by the prescribed form of application (Form 2.1B under the new regime) and must be supported by an affidavit. The Act and Rules specify the information which must be included in the affidavit. The application may be made by the company, its directors, one or more creditors, the justices' chief executive for a magistrates' court (in relation to a fine) or any combination of the above. The application will be listed before a judge.
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| 20.13 |
To make the order the court must be satisfied that the company is or is likely to become unable to pay its debts and that the administration order is likely to achieve the purpose of the administration.
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Out of court
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| 20.14 |
Under the new regime, the holder of a qualifying floating charge, the company or its directors, may appoint an administrator without going through the court process. The appointment becomes effective when a notice of appointment in the prescribed form accompanied by the administrators' consent to act and a statement by him that in his opinion the purpose of the administration is likely to be achieved has been filed with the court. Rule 2.19 makes special provision for filing notice of appointment by fax out of business hours. (Form 2.7B). The fax number for filing notice in the Royal Courts of Justice is 020 7947 6607.
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Schemes of arrangement
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| 20.15 |
A scheme under section 425 of the Companies Act 1985Acts can be proposed whether or not a company is in liquidation. It is necessary to obtain the sanction of the court to a scheme which has been approved by the requisite majority of members or creditors of each class at separately convened meetings directed by the court. If the company is insolvent the objective of the scheme may be more simply and economically achieved by a company voluntary arrangement under Part I of the Act. However, a scheme under section 425 has the advantage that the court may approve the distribution of assets otherwise than in accordance with creditors' strict legal rights.
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| 20.16 |
The application for an order to convene meetings of members or creditors under section 425(1) is made by a CPR Part 8 claim form. The application will usually be heard by a Registrar, unless it is thought that issues of difficulty may arise, in which case it can be heard by a judge. The relevant practice is set out in Practice Statement (Companies: Schemes of Arrangements) [2002] 1 WLR 1345.
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| 20.17 |
The application to sanction a scheme of arrangement, once approved by members or creditors by the statutory majority, is made by petition. The hearing of the petition at which the sanction of the court is sought will be before a judge. If the petition also seeks confirmation of a reduction of capital, there will first be an application to the Registrar for directions. In other cases the petition will go straight to a judge.
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Winding up petitions
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| 20.18 |
Proceedings to wind up a company are commenced by presenting a petition to the court. The presentation of a winding up petition can cause substantial damage to a company. A winding up petition should not be presented when it is known that there is a real dispute about the debt. Practitioners should make reasonable enquiries from their client as to the existence of any such dispute. The court may order a petitioner to pay the company's costs of a petition based on a disputed debt on the indemnity basis.
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| 20.19 |
When a winding up petition is presented to either the Companies Court, a Chancery District Registry or a county court having jurisdiction, particulars including the name of the company and the petitioner's solicitors are entered in a computerised register. This is called the Central Registry of Winding Up Petitions. It may be searched by personal attendance at the Companies Court General Office, or by telephone on 020 7947 7328.
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| 20.20 |
The requirement to advertise the petition (Insolvency Rules, r. 4.11(2)(b)) is mandatory, and designed to ensure that the class remedy of winding up by the court is made available to all creditors, and is not used simply as a means of putting pressure on the company to pay the petitioner's debt. Failure to comply with the rule, without good reason accepted by the court, may lead to the summary dismissal of the petition on the return date (Insolvency Rules, r. 4.11(5)). If the court, in its discretion, grants an adjournment, this will be on condition that the petition is advertised in due time for the adjourned hearing. No further adjournment for the purpose of advertisement will normally be granted.
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| 20.21 |
If an order is made restraining advertisement while an application is made to the court to stop the proceedings, the case is listed in the Daily Cause List by number only so that the name of the company is not given.
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| 20.22 |
Petitions under the Companies Act 1985Acts, section 459, are liable to involve extensive factual enquiry and many of the measures summarised in Section A of this Guide which are designed to avoid unnecessary cost and delay are particularly relevant to them. Procedure is governed by the Companies (Unfair Prejudice Applications) Proceedings Rules 1986 (SI 1986/2000).
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| 20.23 |
Where applications are brought in the Companies Court and in a related case in the Chancery Division at the same time, special arrangements can be made on request to the Chancery Judges' Listing Officer for the applications to be heard by the same judge.
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Applications for leave to act as director of a company with a prohibited name
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| 20.24 |
Section 216 of the Insolvency Act 1986Acts restricts the use of a company name by any person who was a director or shadow director of the company in the 12 month period ending with the day upon which it went into insolvent liquidation -- except with the leave of the court: section 216(3).
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| 20.25 |
The application for leave is governed by the Insolvency Rules 1986, rr. 4.226 to 4.230. These rules provide for certain exceptions to the prohibition. The application for leave is by originating application supported by written evidence.
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| 20.26 |
By r. 4.227 the court may call upon the liquidator for a report of the circumstances in which the company became insolvent and the extent of the applicant's apparent responsibility. However if the liquidator consents to the application it is helpful if his views are put before the court at the outset. The Registrar who then hears the application may be prepared to grant it at the first hearing.
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| 20.27 |
Notice should be given to the Secretary of State and/or the Official Receiver.
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General
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| 20.28 |
Inspection of the court's records and the court file in any insolvency proceedings is governed by Insolvency Rules, rr. 7.28 and 7.31.
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| 20.29 |
The following leaflets are available from the Companies Court General Office:
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(1) |
Current Practice Directions and Practice Notes
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(2) |
"I want to wind up a company which owes me money: what do I do?"
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(3) |
Treasury Solicitors' -- A Guide to company restoration
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(4) |
"I want to apply to extend time for registration of a charge or to rectify a mis-statement or omission (in the registered particulars of a charge or of a memorandum of satisfaction): what do I do?"
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(5) |
Dealing with debt. How to wind up your own company
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