Article contributed by Nigel Clayton

Rectification of the companies register – making of administration 

Case Name, Reference, and Judgement 

MS Lending Group Limited v LVR Capital Limited 

[2023] EWHC 2509 (Ch) 

Summary 

The High Court ordered rectification of the companies register to show that two company charges remained ‘outstanding’ and then made an administration order in respect of the company. 

Facts 

Two lenders advanced £800,000 to a borrower company on the security of debentures which included floating charges, and which were registered at Companies House. 

The sole director of the borrower company filed statements of satisfaction at Companies House incorrectly stating that the charges had been satisfied, based on promissory notes that he had issued in purported payment and redemption of the charges. 

In default of payment, the lenders appointed receivers and subsequently issued administration applications (1) for rectification of the register at Companies House, and (2) for an administration order. 

Issues 

Whether and on what basis the court could order rectification of the Companies Register to correct the wrongful removal of company charges. 

Held 

(HHJ Hodge KC sitting as a Judge of the High Court): It was not open to the director to unilaterally seek to discharge the company’s secured indebtedness by way of promissory notes. To the extent that the director had taken the view he could do so was ‘plainly a legal nonsense.’  

The court had power to order rectification of the Companies Register pursuant to s 859M Companies Act 2006 where it was just and expedient to do so on the basis that there had been an omission or misstatement in any statement or notice delivered to the registrar, and (a) that the omission or mis-statement (i) was accidental or due to inadvertence or to some other sufficient cause, or (ii) is not of a nature to prejudice the position of creditors or shareholders of the company, or (b) that on other grounds it is just and equitable to grant relief. 

There was clearly an omission or misstatement in the purported statements of satisfaction which were false and that the provision of statements that are legally incorrect is some other sufficient cause in s 859M(2)(a)(i) or that it rendered it just and equitable to rectify the register in s 859M(2)(b). Rectification ordered. 

A secured creditor under a floating charge had the power to appoint administrators under Para 14, Schedule B1, Insolvency Act 1986 (even if it had been wrongly marked as satisfied – per Re NMUL Realisations Ltd [2021] EWHC 94 (Ch)). The court was satisfied that the company could not pay its debts for the purposes of Para 35, Schedule B1.  Alternatively, the court would have granted an administration order to the applicant lenders in their capacity as creditors of the company pursuant to Para 12, Schedule B1. The receivers were accordingly appointed as joint administrators. 

Comment 

We do not often cover company charges. A statement of particulars of a charge created by a company pursuant to s 859D Companies Act 2006 is required to be delivered to the Companies registrar for registration within 21 days after the date of creation of the charge pursuant to s 859A, and in default is void against a liquidator, administrator, or creditor of the company under s 859H unless an extension of time is obtained under s 859F.  

Under s 859F(2) and (3) the court may on the application of a company or person interested and on such terms and conditions as seem just and expedient order that the period allowed for delivery be extended, on the ground that (a) the failure to deliver those documents (i) was accidental or due to inadvertence or to some other sufficient cause, or (ii) is not of a nature to prejudice the position of creditors or shareholders of the company, or (b) that on other grounds it is just and equitable to grant relief. 

The application is usually made by Part 8 Claim Form with witness evidence – see CPR PD 49A and see the notes in the White Book 2023, Vol 2 at 2G-45.  

Note that the requirement to register particulars of a company charge at the Companies Registry is in addition to the normal requirement to register the charge at HM Land Registry.  

For HM Land Registry practice and procedure in respect of the registration of company charges, see Practice Guide 29: registration of legal charges and deeds of variation of legal charges, para 4. 

See also the HM Land Registry note – Avoiding Land Registry requisitions in respect of company charges.