Company liquidation and/or the removal of a company from the New Zealand Companies Office Register are very common ways of bringing a company to a timely demise once a company has reached its use by date. Many directors also do this in an effort to stop potential liabilities from continuing to accrue.
However, a recent case has raised the issue of what happens when an asset is forgotten until after the company has been euthanized.
The High Court at Wellington recently dealt with a case of a company called JFP (NZ) International Limited which was liquidated and de-registered in 2011. It subsequently turned out that the company had a valuable asset in the form of a mining licence. The licence proved to have a value of some $15m per annum.
On the face of it, when a company has been liquidated and then removed from the Companies Office Register any of its assets are forfeited to the Crown, or to use the Latin phrase they are “bona vacantia” in much the same way as the assets of a natural person who dies without a will or any other entitled heirs. In the case of a company, that is very unfair on the shareholders. Therefore, the High Court was willing to resurrect the company and restore it to the New Zealand Companies Office Register.
This was no doubt a time consuming and expensive exercise which was worth it in that case because of the amount of money involved. If the amount involved had been a lot less (as is often the case) then the costs associated with reinstatement of the company may have been prohibitive.
The message is very clear. Company shareholders and directors must be very sure indeed that a company has no remaining assets before they take steps of liquidating and/or removing the company form the Companies Office Register. As always, prevention is much cheaper than cure.