The Gazette 1990

GAZETTE

A PRIL 1990

issued in its name. Neither can all the shareholders, in their own names issue the intended " . . . Section 28 of the Stete Property Act 1954 expressly provides thet where e compeny hes been dissolved ell reel end personsl property . . . vests in the Stste proceedings. Such right of action, if any, which subsisted constituted an asset of the company and therefore under Section 28 it is now vested in the State. Proceedings would accordingly have to be issued in the name of the Minsiter for Finance. The Position of Creditors The adverse effects of dissolu- tion are potentially even more serious for the company's creditors. Just as the company can no longer sue after dissolution, similarly all personal rights of action against the company are lost. Consequently, the company's unsecured creditors can expect to receive no payment in respect of monies owing to them. The position of the secured creditors is, however, somewhat better. After dissolution, such land as belonged to the company will vest in the State, subject to the same charges, encumbrances, etc as existed prior to dissolution. 9 In other words, the State can claim no better title to the land than that which was previously held by the company. This protects the position of creditors whose security was represented by the company's land. However, as regards other creditors whose security was over pure personalty, they would no longer appear to have a right of recourse against any particular assets. This would include for example, the creditor who had a floating charge over the stock-in- trade of the company. Upon dissolution his security, in effect, ceases to exist and he is placed in the same position as an unsecured creditor, in that he cannot expect to receive any payment in respect of monies owing to him. Re Kavanagh and Cantwell 10 The circumstances of this case were that certain property was held

on trust by one company for another pending the transfer to the latter of the legal title. The first company went into liquidation and was ultimately dissolved. However, owing to an oversight, the legal title to the property was never trans- ferred to the second company. In proceedings before Costello J. the question was raised as to whether the title to the property had vested in the State subsequent to the dissolution. However, the Attorney General wrote to the Court indicating that the State did not claim the property. This, it is submitted is the correct view. In Section 28 of the 1954 Act it is expressly stipulated that property subject to a trust does not vest in the State. Having determined that the State had no interest in the land, the issue that was presented to the court was how to convey the legal title to the second company. The answer, according to Costello J, was to be found in Section 26 of the Trustee Act 1893. This section provides that where a trustee entitled to any land 'cannot be found', the court may make a vesting order vesting the land in 'any such person in any such manner and for any estate as the Court may direct'. Costello J. held that as the first company no longer existed in the eyes of the law and as the Attorney General had stated that no claim to the premises was being made by the State, this was therefore a case in which the trustees of the trust could not be found. He accordingly made an order, pursuant to Section 26 of the 1893 Act, that the legal title to the premises should vest directly in the second company.

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for Finance. Alternatively, the company could have been restored to the register pursuant to Section 12(6) of the 1982 Act (as to which, see below) and the company itself could have then effected the transfer. The Position of Employees An interesting point arises in relation to the company's em- ployees. Where a company is being wound up, the employees may rank to an extent as preferential creditors. 11 Indeed, they may also be entitled to payment out of the Redundancy Fund pursuant to the terms of the Protection of Em- ployees (Employer's Insolvency) Act 1984. Different consideratiaons arise where the company has not been wound up prior to dissolution. The contracts of employment undoubt- edly constituted property of the company. But do they vest in the State after the company has been dissolved? Contracts of employment are personal contracts of service, and the authorities indicate that once either party to that contract dies (dissolution being after all, the legal death of the company) then that contract automatically terminates. 12 If these cases represent the law, then the employees will lose their jobs upon dissolution, perhaps being owed arrears of wages.

" . . . the company's unsecured creditors can expect to receive no payment . . . "

Presumably, if the facts had been slightly different, and prior to dissolution, the property had been held by the company subject to a mortgage or charge rather than subject to a trust, the property would have automatically vested in the State. In such a case, the legal title could then have been quite simply conveyed by a deed of transfer, executed by the Minister

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