Contract validly terminated where one party struck off, even where it is subsequently restored

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2 min read

The general effect of an administrative restoration is that the company is deemed to have continued in existence as if it had not been dissolved or struck from the Register (Section 1028(1) of the Companies Act 2006 [CA2006]). However, this does not have universal effect, especially as against the actions of third parties.

Bridgehouse and BAE entered a contract that contained a termination provision allowing BAE to terminate the agreement if an event of default occurred. Event of default included Bridgehouse being struck from the Register. When Bridgehouse was struck from the Register, BAE gave notice of termination in accordance with the agreement. Bridgehouse applied for administrative restoration and, upon being restored to the Register, Bridgehouse argued that it was deemed to have continued in existence and as such the agreement had been incorrectly terminated. BAE maintained the termination of the agreement was lawful. The dispute was referred for arbitration. 

The Arbitrator found that the agreement had been validly terminated and that this was not altered by Bridgehouse’s subsequent restoration. Bridgehouse appealed the decision to the Court. The appeal was heard by Mrs Justice Cockerill DBE who reviewed the authorities and the legislative purpose behind administrative restorations before concluding that the Arbitrator’s decision was correct. The appeal was dismissed. 

Given the similar wording in Section 1032(1) CA2006, which applies to court restorations, if a company is being restored and the desired effect of such restoration is to have an effect on a third party, it may not be sufficient to rely on the deeming provisions. The company may need to consider making an application to the court for further directions. However, as this case shows, such directions will not necessarily be forthcoming, especially where the third party has acted in accordance with the law during the time that the company was struck from the Register.

Bridgehouse (Bradford No. 2) v BAE Systems Plc [2019] EWHC 1768 (Comm)

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