Kings Court Trust Ltd v Lancashire Cleaning Services Ltd

The court allowed a Part 8 application under section 125 of the Companies Act 2006 to rectify the companys register of members and to permit the executors to make the necessary entries immediately. The judge held that, although a company would ordinarily require production of a grant of probate before registering executors, the court may decide title and order rectification under s125 where exceptional circumstances make delay unjustifiable.

The key grounds for the decision were (i) the absence of any officer (no director and no company secretary) capable of acting for the company, (ii) an urgent commercial risk arising from the company's bank account being frozen and imminent payroll and VAT liabilities, (iii) an application for a grant of probate had been lodged, and (iv) authority in principle to permit executors who had not yet proved to bring proceedings (Re Goodman) and for the court to determine title under s125. The court also dispensed with service under CPR 6.16 because of the absence of any officer to accept service.

This was a first-instance Part 8 claim issued on very short notice seeking an order under section 125 of the Companies Act 2006 to rectify the register of members of Lancashire Cleaning Services Limited by removing the late sole shareholderdirector and entering the named executors as the holders of his shares. The claimants were two executors-trustees (one corporate and two individuals) named in the deceased's will; a third executor was added to the claim after initial hearing. The company had no surviving director or secretary and continued to trade, but its bank account had been frozen, creating imminent liabilities (staff wages and VAT) and a risk of irreparable harm to the business.

Nature of relief sought: rectification of the register of members under s125 Companies Act 2006; permission for the claimants to make the entries themselves immediately; an order dispensing with service; and an order that notice of the rectification be given to the registrar of companies.

Issues framed by the court included:

• whether persons who have not yet obtained probate may bring proceedings and be registered as members;
• whether the requirements of section 125 are met so as to justify rectification of the register prior to production of a grant of probate;
• whether service of the claim could be dispensed with under CPR 6.16.

Reasoning and outcome: the court relied on the principle in Re Goodman that an executor derives title under the will from death and may bring proceedings before proving. The judge observed that ordinarily a company may properly require production of a grant of probate, but that s125 permits the court to decide questions of title and to order rectification where appropriate. Having regard to the exceptional circumstancesno officers to act, frozen account, imminent payroll and tax liabilities and a probate application already lodgedthe court concluded that unnecessary delay would occur if it required a grant of probate before ordering relief. The court therefore exercised its discretion under s125 to order rectification, authorised the claimants to make the entries immediately, directed that notice be given to the registrar under s125(4), dispensed with service under CPR 6.16, and ordered no costs. The judge emphasised that the decision was exceptional and not a precedent for ordinary cases where officers and shareholders can await a grant of probate.

Application under section 125 of the Companies Act 2006 granted. The court ordered rectification of the register by removing the deceased and entering the three named executors as holders of the 1,000 (1) ordinary shares, permitted the claimants to make the necessary entries immediately, directed notice to the registrar under s125(4), and dispensed with service under CPR 6.16. The rationale was that exceptional circumstances (no company officers, frozen bank account, imminent liabilities and a pending probate application) made delay for production of a grant of probate unjustifiable and that s125 empowers the court to decide title and order rectification.