When taking out a mortgage for the purchase of a property, a lending company will likely require a restriction to be registered with the property registry in the land registry for its security. Similarly, when an incorporated business takes out a loan, a lending company may require that a charge (a form of security for a loan) be lodged at Companies House for its security.
Provided the relevant loan conditions are met, a restriction charge is unlikely to cause a problem for a borrower, and will simply be removed after full loan release. But what if the parties simply forgot to remove the charge and the loan company has now been dissolved? And what if the lending company is dissolved before the loan is fully repaid?
Simply keeping encumbrances and restrictions at Companies House and the Land Registry may cause further disruption to the borrower, which may prevent the property from being sold or prevent further financing from being secured by the property . It is therefore advisable to remove restrictions and waived fees.
What is dissolution?
As a brief comment on what happens to a loan company when it is dissolved, dissolution is the process by which a company is removed from the Companies House register and then ceases to be a formal legal entity.
There are many ways and reasons to dissolve a lender, but it’s easy to check if this is the case for businesses in the UK. Simply search for the relevant company on the following link:
What is the impact of dissolution on the assets of a lending company?
If, at the time of the dissolution of the Lending Company, there are any property or rights to which the Lending Company is entitled that have not previously been sold or transferred, such property and rights will substantially pass to the Crown.
There are various caveats and exclusions that apply to this concept, as well as various procedural requirements that must be followed, but these are beyond the scope of this article.
Removal of Companies House fees
The process of removing a charge from Companies House when the lending company has been dissolved depends very much on the status of the loan.
If, at the time of the dissolution of the lending company, the loan has been repaid in full, the borrower can simply ask his lawyer to remove the charge on his behalf using appropriate proof of full repayment.
If, however, at the time of the dissolution of the lending company, the loan has not been fully repaid, the situation is a little more complicated.
A borrower should not just remove the charge unilaterally by instructing their lawyers. This will not invalidate the charge and there is a risk that the Crown may sue the borrower for monies still owed.
There are a number of solutions in this situation, which vary on a case-by-case basis and therefore legal advice should be sought to determine which is appropriate. It can be as simple as getting confirmation from a contact at the now-disbanded lender that a new lender has officially taken over from the old lender. Alternatively, the Crown will have to indicate how to repay the outstanding sums.
Deleting an entry in the land register
As with the removal of a charge from Companies House, the procedure required to remove an entry from the land register when the lending company has been dissolved depends very much on the status of the loan.
If a borrower is satisfied that all monies have been paid and has evidence to that effect, the Registrar shall have discretion to remove the registration following a request from the borrower’s attorneys.
Alternatively, if there are still outstanding loans, formal court applications may be required. Legal advice should be sought to determine the best course of action.
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.