Before : |
J. A. Clyde-Smith, Esq., Commissioner, and Jurats Fisher and Liston |
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Between |
Salamanca Corporate Services (Jersey) Ltd |
Representor |
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And |
(1) Minories HPY (2) Minories New Basis (3) Merrill Lynch (4) Her Majesty's Receiver General (5) New Basis LLC |
Respondents |
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IN THE MATTER OF THE REPRESENTATION OF SALAMANCA CORPORATE SERVICES (JERSEY) LTD AND SALAMANCA FIDUCIARY SERVICES (JERSEY) LTD
AND IN THE MATTER OF 15 MINORIES HOLDING LIMITED
AND IN THE MATTER OF AN APPLILCATION PURSUANT TO ARTICLE 155 OF THE COMPANIES (JERSEY) LAW 1991, (AS AMENDED)
Advocate F. Ford for the Representor.
judgment
the commissioner:
1. This is an application by Salamanca Corporate Services (Jersey) Limited and Salamanca Fiduciary Services (Jersey) Limited, the representors, who are the present corporate directors of a Jersey-registered company known as 15 Minories Holding Limited ("the Company").
2. The representors apply to the Court for the just and equitable winding-up of the Company pursuant to Article 155 of the Companies (Jersey) Law 1991, as amended ("The Companies Law") and for directions enabling the representors to pay the monies standing to the credit of the Company's account to either the shareholders in accordance with their percentage shareholding in the Company, or (in circumstances where the shareholders have been dissolved) their percentage to Her Majesty's Receiver General.
3. The Company was incorporated in 1999 for the purposes of property investment.
4. The current shareholders of the Company are stated to be:-
(i) Minories HPY, a Cayman registered company owned by the Baupost Group LLC ("Baupost"), which holds 52.25% of the shares;
(ii) Merrill Lynch Mortgage Capital Inc ("Merrill Lynch"), a group company registered in the United States of America and associated with Catalyst Capital (Catalyst Capital), which holds 42.75% of the shares; and
(iii) Minories New Basis LLP ("Minories New Basis"), a company registered in the Unites States of America and owned by New Basis LLC ("New Basis"), which holds 5% of the shares (together the Sharehoders).
5. In January 1999, an English property known as 15 Minories, London EC3 ("the Property") was purchased by the Company for £17,500,500.00 with the help of finance obtained from Rheinische Hypothekenbank.
6. On 28th November, 2003, the Property was sold to an English registered company, Hallco 942 Limited, for a purchase price of £8,250,000.00. In order to establish whether or not the Company had any outstanding tax or other liabilities, it was decided that the Company would remain live for a period of six years. The Company has been dormant since the sale of the Property but all annual returns have been paid.
7. What is left of the proceeds from the sale of the Property were (until recently) held in an onshore account with HSBC Plc ("the HSBC Account"). The monies in the HSBC Account comprise the total assets of the Company.
8. On 17th June, 2016, the Representors requested that the HSBC Account be closed and that all monies standing to the credit thereof be transferred to the Jersey client account of the Representors to be held for the Company.
9. Efforts have been made to wind up the company between 2009 and 2012. The present positon is that Minories HPY has been struck off the Cayman Companies Register as of 31st March, 2006, and Minories New Basis was dissolved on 21st September, 2005.
10. In 2015, the representors, through their legal advisers, Walkers, sought to engage with the shareholders (and the ultimate owners of the shareholders in respect of Minories HPY and Minories New Basis) with a view to understanding whether Minories HPY and Minories New Basis would be reinstated and so as to allow an orderly winding-up of the Company.
11. In the case of Minories HPY, its owner, the Baupost, confirmed that it would not be re-instating Minories HPY.
12. In the case of Minories New Basis, its owner, New Basis, confirmed that there was no basis to re-instate Minories New Basis. New Basis requested that any monies due to Minories New Basis on any liquidation be paid to it.
13. As regards Merrill Lynch, despite repeated attempts to contact it, no communication was received until after service of the present proceedings.
14. The representors have engaged with Her Majesty's Receiver General given the difficulties facing the Company.
15. By letter dated 29th May, 2015, Her Majesty's Receiver General confirmed that he would be willing to accept the transfer of funds and that it was customary for an indemnity to be provided whereby funds would be held for a period of ten years or until the Company can no longer be reinstated, at the expiry of which period, the assets will be claimed by the Crown absolutely.
16. The representor's Advocates are advised that the Company's assets as at the date of this Skeleton Argument are £35,151.42.
17. Neither the Jersey Financial Services Commission nor the Comptroller of Income Tax are owed any monies from the Company.
18. The liabilities or potential liabilities of the Company are or will be, subject to any orders of the Court:-
(i) Outstanding administration fees (capped at £2,500);
(ii) Winding-up costs (capped at £3,000);
(iii) Legal costs (capped at £20,000).
19. On 29th April, 2016, the representors first presented the Representation to the Royal Court and obtained orders:-
(i) convening the shareholders and Her Majesty's Receiver General to the substantive hearing; and
(ii) permitting service of the Representation and Affidavit in support on the shareholders (and in the case of Minories HPY and Minories New Basis, their owners in order that they could make representations to the Court, as appropriate), all of whom reside outside of the jurisdiction.
20. On 4th May, 2016, the shareholders were served with the documents both by email and by registered post. The emails sent to the Representor's contacts at Merrill Lynch both bounced back, the recipients' email addresses no longer being in service. On 5th May, 2016, the documents were served on Her Majesty's Receiver General.
21. On 10th and 12th May, 2016, the representor's Advocates were advised that the courier was having difficulties in delivering the documents to one of the New York addresses given for Merrill Lynch. The representor was not able to provide alternate contact details and therefore the documents intended for that address were destroyed. However, the representor is satisfied that Merrill Lynch has been served at the other two alternate addresses provided.
22. There has since been correspondence with Merrill Lynch, namely with Mr A. Golomb, who confirmed that Merrill Lynch would support the application for a just and equitable winding-up of the Company and it was agreed that Merrill KLynch would write a letter confirming its position.
23. Mr Golomb has corresponded with the representor's Advocates, raising various queries with regard to the tax status of the Company and further queries with regard to the application. Although Merrill Lynch have in fact declined to write a formal letter, setting out its position, Mr Golomb has provided Merrill Lynch's account details.
24. The representors are satisfied that Mr Golomb is authorised to represent Merrill Lynch, having obtained the necessary due diligence paperwork on Mr Golomb personally, together with a Limited Power of Attorney dated 8th June, 2016.
25. Nothing has been received from either Baupost or New Basis as owners of Minories HPY and Minories New Basis respectively in response to serving the documents on them.
26. The current position is therefore as follows:-
(i) Minories HPY has been dissolved and will not be re-instated;
(ii) Minories New Basis has been dissolved and will not be re-instated. Its owner, New Basis, indicated in correspondence that it wished to receive any funds due to Minories New Basis on a liquidation. However, it is not the shareholder in the company. Nothing further has been received from New Basis since issuing the representation;
(iii) Merrill Lynch wishes to receive all and any monies owing to it as shareholder of the Company but is not taking any active role; and
(iv) Her Majesty's Receiver General is taking no active role in the proceedings but will receive funds on behalf of the Crown on the terms of an indemnity to be given.
27. The representors therefore apply to the Royal Court for a just and equitable winding up of the Company. In considering whether or not to grant such an application, the Court will need to consider three main issues, namely:-
(i) Is this an appropriate case in which the Court should order a just and equitable winding up of the Company?
(ii) In the absence of any intention to reinstate Minories HPY or Minories New Basis, is it appropriate for Her Majesty's Receiver General to receive funds representing monies that those companies would otherwise receive in proportion to their shareholding in the Company? and
(iii) If an order for a just and equitable winding up of the Company is appropriate, is it appropriate for a liquidator to be appointed?
28. Turning to the Companies Law, Article 155 of the Companies Law, insofar as is relevant, states:-
"155 Power for court to wind up
A company, not being a company in respect of which a declaration has been made (and not recalled) under the Désastre Law, may be wound up by the court if the court is of the opinion that:-
(a) it is just and equitable to do so; or
(b) it is expedient in the public interest to do so.
(1) An application to the court under this Article on the ground mentioned in paragraph (1)(a) may be made by the company or by a director or a member of the company or by the Minister or the Commission or by a supervisory body within the meaning of the Proceeds of Crime Supervisory Bodies (Jersey) Law 2008
[...]
(4) If the court orders a company to be wound up under this Article it may:-
(a) appoint a liquidator;
(b) direct the manner in which the winding-up is to be conducted; and
(c) make such orders as it sees fit to ensure that the winding-up is conducted in an orderly manner."
29. As is clear, the representors (being the directors of the Company) have the requisite standing to request that the Company be wound up on just and equitable grounds.
30. Alternative measures are not available in the present circumstances:-
(i) The Company is not insolvent and therefore a Désastre would not be appropriate;
(ii) The Company cannot be the subject of a summary winding-up. A quorum for a shareholder meeting cannot be achieved because only one of the three shareholders remains in existence and the Company's Memorandum & Articles of Association require at least two members for there to be a quorum. Furthermore, the Company would be required to pass a Special Resolution in accordance with Article 146 of the Companies Law, which would require two-thirds of the members of the Company to pass such a Special Resolution. Merrill Lynch holds 47.25% of the issued shares of the Company which is insufficient; and
(iii) Similar difficulties apply to a creditors winding up because the Company cannot pass the requisite special resolution.
31. The representors do not consider it in any way appropriate to allow the Company's name to be struck off the companies register pursuant to Article 205 of the Companies Law by failing to file the annual return on behalf of the Company and pay annual fees because:-
(i) The representors and the Slamanca Group are regulated by the JFSC;
(ii) Failure to comply with Article 71 of the Companies Law with regard to the filing of Annual Returns will render the Company guilty of an offence;
(iii) By reason of Article 205(8) of the Law, in the event that the Company's name is struck off the register, "...the liability (if any) of every director and member of the company shall nevertheless continue and may be enforced as if the company had not been dissolved".
32. The representors consider therefore that there is no alternative in respect of the dissolution of the Company other than by an order for its just and equitable winding up.
33. The jurisdiction to make an order under Article 155 of the Law has been considered by the Royal Court on a number of occasions, with the Royal Court previously having described its jurisdiction as a power that should be used flexibly. In Jean v Murfitt 1996/237 the Court stated:-
"We conclude by observing that the words "just and equitable" in Article 155 of the 1991 Law should be given flexible interpretation. Justice and equity cannot be confined within the four corners of specific instance".
34. This notion of flexibility was again discussed in Re Leveraged Income Fund Limited 2002/209 (cited with authority in In the Matter of the Representation of Huelin-Renouf Shipping Limited [2013] JRC 164), in which the Court said:-
"The words "just and equitable" are general words. As Palmer's Company Law Vol. 3, para 15.219 puts it:-
"It has sometimes been suggested that there is an exhaustive list of situations that may fall within the scope of the "just and equitable" clause, but it now seems that although such classification may be convenient for purposes of presentation, the words "just and equitable" require a more flexible interpretation. In the words of Lord Wilberforce: "Illustrations may be used, but general words should remain general and not be reduced to the sum of particular instances.""
35. However, whilst the Court has considered its powers to wind-up a company on just and equitable grounds to be both flexible and wide, the Court has said that there should be some valid reason for an equitable winding up to take place other than as a summary winding-up or pursuant to a creditors' winding up. This issue was discussed in In the Matter of Green Equity and In the Matter of Myfuel Limited [2013] JRC 169A, in which the Court said:-
"It is frequently and rightly said that one of the grounds for an order under Article 155 is that the substratum for the company must have gone ...".
36. So turning to our decision on those issues and taking the first issue, it is clear from the case law that the Court has a wide jurisdiction to order a just and equitable winding up of the Company and we agree with the representors that this is an appropriate case in which to make such an order for the following reasons, namely:-
(i) The only route open to the representors in respect of the dissolution of the Company is to seek to invoke the jurisdiction of the Royal Court to order a winding up of the Company on "just and equitable grounds", pursuant to Article 155 of the Law. The alternatives to dissolution on just and equitable grounds are not available in the current circumstances.
(ii) Allowing the Company to be struck off the register pursuant to Article 205 of the Law would be inappropriate, for the reasons which we have just set out above.
(iii) The Company was established for the purposes of property investment. The Property was sold in 2003. Two of the shareholders have been dissolved (Minories HPY and Mnories New Basis) and their owners have no intention of re-instating those companies. The substratum of the Company has gone. It is currently a live, solvent, but dormant company serving no purpose (and will serve no purpose).
(iv) Merrill Lynch (as the only live Shareholder of the Company) fully supports the representor's application.
37. In terms of the second issue, in the absence of any intention to reinstate Minories HPY or Minories New Basis, we agree that it is appropriate for Her Majesty's Receiver General to receive funds representing monies that those companies would otherwise receive in proportion to their shareholding in the Company for the following reasons:-
(i) Although no authority has been presented to us, it is our understanding that under our customary law where a Jersey company still owning moveable property situate in Jersey has been dissolved, Her Majesty's Receiver General, on behalf of the Crown, will be entitled to claim those assets as bona vacantia. The Crown's claim to bona vacantia arises in Jersey by virtue of the Royal Prerogative.
(ii) In the present case, the representors have previously engaged with the shareholders (and their owners) with a view to summarily winding up the Company and distribute the remaining assets out to them in accordance with their respective shareholding. Minories HPY and Minories New Basis have long been dissolved. There is no intention on behalf of the owners of Minories HPY and Minories New Basis, it appears, to re-instate them and no summary winding up can therefore be effected.
(iii) In June 2015 New Basis (as owner of Minories New Basis) did request that any assets due to Minories New Basis be paid to it. However, nothing has been heard from Baupost or New Basis in relation to this application. The representors therefore consider, rightly, that the Company can only distribute its assets to its shareholders and New Basis is not a shareholder of the Company.
(iv) In these circumstances, the representors would propose distributing to Merrill Lynch such amount from the Company's assets (after payment of any liabilities) that represent its percentage shareholding in the Company, with the remainder paid to Her Majesty's Receiver General (which would represent the percentage shareholding of Minories HPY and Minories New Basis in the Company).
(v) In the event that a distribution was made to Merrill Lynch and thereafter the Company was immediately struck off the companies register pursuant to Article 205 of the Law, Her Majesty's Receiver General would be entitled to claim the Company's remaining assets and hold them for ten years pending any application under Article 213 of the Law (with regard to the power of the Court to declare dissolution of company void. Thus, what the representors propose, subject to the directions of this Court direction, is to achieve what would, in practice, happen.
(vi) Her Majesty's Receiver General will hold the assets for ten years before they are claimed absolutely by the Crown. In the event that either of Minories HPY or Minories New Basis are reinstated, then they can apply to the Court under Article 213 of the Law to seek to have the Company reinstated with a view to having any assets that they may claim title to and that have been paid to Her Majesty's Receiver General returned.
38. Finally, turning to the third issue, and given the sums of money available for distribution that this is not an appropriate case in which a liquidator should be appointed for the following reasons:-
(i) If the Court approves the payment of the administrative, winding-up and legal costs incurred in relation to this matter (which fees are being capped so as to ensure that there are sufficient funds available to enable some sort of distribution), the likely amount available for distribution will be just under £10,000. In the event that a liquidator is appointed, there will be little, if anything, available for distribution to the shareholders and/or Her Majesty's Receiver General.
(ii) The representors are regulated companies and have conducted winding up procedures on previous occasions. A draft order has been presented to us which sets out the steps that it is proposed the Court would direct them to take in order to bring the winding up of the Company to an end. Given the value of the Company's assets, it is appropriate for the Court to order that the representors conduct the just and equitable winding up of the Company in accordance with those directions which we will give shortly.
39. In conclusion this is an appropriate case in which a just and equitable winding up of the Company should be ordered and for the representors to conduct the winding up. The Company now has no purpose, has limited financial resources and the only annual costs incurred are as a result of administrative and statutory fees. It is not in the interests of the shareholders for the Company to remain as a live entity. There is no other remedy available to the representors.
40. We therefore give the orders set out in the draft that has been presented to us and which we approve.
Authorities
Companies (Jersey) Law 1991, as amended.
Jean v Murfitt 1996/237.
Re Leveraged Income Fund Limited 2002/209.
In the Matter of the Representation of Huelin-Renouf Shipping Limited [2013] JRC 164.
In the Matter of Green Equity and In the Matter of Myfuel Limited [2013] JRC 169A.