It is common to see Court proceedings commenced in the name of an individual or against an individual. But sometimes, Court proceedings are commenced by or against companies (like a company that is a “Pty Ltd” or a “Limited”).
When a company is created, it is “incorporated” and placed on the register of companies maintained by the Australian Securities and Investment Commission (ASIC). This means that a company is “registered”. That is when a company becomes a separate legal entity that can sue or be sued in its own name.
But what if a “registered” company is “in liquidation”, “under administration” or has become “deregistered”?
First, what do these things mean?
- Liquidation – A company in liquidation is still registered but has had a liquidator appointed to take control of the company in place of its directors. The liquidator will close down the business operated by the company and sell all of its assets to pay debts the company owed to its creditors. Typically, a company is in liquidation because it is insolvent – i.e. it cannot pay its debts as and when they fall due.
- Administration – A company under administration is still registered but has had an administrator appointed to it to take control of the company in place of its directors. An administration ends in one of 2 ways – the creditors will either approve an arrangement to the bring the company out of administration and back into normal business operations (known as a deed of company arrangement or DOCA), or it will convert to a liquidation (see above). Typically, a company is placed into administration because it is insolvent, but there is a chance its creditors will approve a DOCA.
- Deregistered – A deregistered company is one that has been removed from the ASIC register. Upon that occurring, it ceases to exist and is no longer a legal entity capable of suing or being sued in its own name. A company can be deregistered by its shareholders, after completion of a liquidation, or by ASIC.
Second, what happens if an insured company that suffered a loss, or a company that is liable for an insured’s loss, is in liquidation, under external administration or has been deregistered?
Liquidation and Administration
Where you are recovering the subrogated losses of a company in liquidation or administration, you can commence Court proceedings in the name of the liquidator or administrator on behalf of the company (i.e. “Joe/Jane Bloggs” in his/her capacity as liquidator/administrator of XYZ Pty Ltd (in liquidation/administrator appointed)”).
Because of this, it would be sensible to obtain the agreement of the liquidator or administrator to use their name to commence the proceedings and to distribute the proceeds of the recovery in accordance with the applicable insurance policy. If such an agreement cannot be reached, the company’s insurer can seek an order of a Court allowing that to be done and/or confirming how the proceeds of the recovery are to be distributed.
For settlements (to pursue a company in liquidation or administration for an insured’s loss), Court proceedings cannot be commenced against the company without permission (leave) of the Court. In certain circumstances and states, permission (leave) of the Court can also be sought to recover directly from the company’s insurer (i.e. pursuant to the Civil Liability (Third Party Claims Against Insurers) Act 2017 (NSW).
- Deregistered
A deregistered company cannot pursue a recovery, or defend a proceeding, as it no longer exists. In order to seek recovery on behalf of or from a company that has been deregistered, that company will have to be “re-registered” on the ASIC register first before Court proceedings can be filed in its name or against it.
Remember that where a company has been deregistered, its insurer can be pursued directly and without leave of a Court. Please see previous article addressing these types of claims.
The content of this article is intended to provide a general guide to the subject matter. Specific advice should be sought about your specific circumstances.
