Andrew Bland & Anor v JDK Construction Limited (in liquidation) & Anor

For a creditors’ voluntary liquidation to be valid, the required resolution must be passed with the participation of those who are members according to the company’s register at the relevant time. The register is conclusive for that purpose, notwithstanding that it may later be rectified. A later rectification does not retrospectively invalidate a winding-up resolution passed when the person’s name was absent from the register.

Insolvency Act 1986, section 232, does not validate acts where no valid resolution has commenced the liquidation and the liquidators’ appointment is therefore a nullity. In any event, it cannot validate acts done after the defect in appointment has been identified.

Joint liquidators applied for directions and declarations concerning their appointment in the creditors’ voluntary liquidation of JDK Construction Limited. The company’s register recorded Mrs Julie Keegan as its sole shareholder and director when she purported to pass the special resolution placing the company into liquidation.

Mrs Jeanette Keegan disputed the validity of a stock transfer form which had removed her remaining 50 per cent shareholding. She subsequently issued rectification proceedings, but those proceedings were settled by a Tomlin order without a judicial determination of whether the transfer form was effective.

The central issues were whether the register determined membership for the purpose of the winding-up resolution and whether any defect could be cured under section 232 of the Insolvency Act 1986.

1. Declaration granted. The appointment of the applicants as joint liquidators was valid.
2. If the transfer of Jeanette Keegan’s shares had been ineffective, she would have remained the holder of those shares. Because she was not given notice of the meeting at which the special winding-up resolution was proposed, the resolution would ordinarily have been invalid under section 84(1)(b) of the Insolvency Act 1986.
3. Section 232 of the Insolvency Act 1986 does not apply where no valid resolution has placed the company into creditors’ voluntary liquidation and the purported appointment is consequently a nullity. Even if it applied, it would not validate acts performed after the defect in appointment had been identified.
4. The decisive question was whether Jeanette was to be treated as a member when her name did not appear in the register of members. Section 112(2) of the Companies Act 2006 provides that a person whose name is entered in the register is a member. The statutory scheme, including the court’s power to rectify the register under section 125, makes the register conclusive as to membership at the time of the resolution.
5. Accordingly, even if the register were later liable to rectification because the transfer was forged, Jeanette was not a member for the purpose of the resolution when her name was absent from the register. The company was therefore validly placed into voluntary winding-up. The alternative relief sought under section 232 did not require determination.