When placing a company into Members’ Voluntary Liquidation (“MVL“), the statutory declaration of solvency is not simply a box‑ticking exercise.  The recent High Court judgment in Greenbank Technology Ltd (in liquidation) serves as a stark reminder that a statutory declaration is a substantive legal act, not just a formality that can be cured later.

Greenback Technology Ltd (the “Company“) carried on the business of manufacturing can-making machinery and thermal process engineering equipment. It, together with its parent, formed part of the wider group owned by ASP CPM Holdings, LLC (“Group“). In 2024, the Group underwent a rationalisation process in order to simplify the Group’s corporate footprint and thus minimise the Group’s reporting obligations. The Company was to transfer all of its assets to its parent company in a hive up, undergo a capital reduction, and then enter into  MVL to be wound-down solvently.

As required by s89 Insolvency Act 1986, where it is proposed to wind up a company via a solvent liquidation, the directors (or a majority of such) must make a statutory declaration of the company’s solvency, confirming they have made a full inquiry into the company’s affairs and have formed the opinion that the company will be able to pay its debts in full, together with interest at the official rate within 12 months from the date of the commencement of the winding up.

The main point of contention in Greenbank was a seemingly simple, but fatal error: one director did not swear the statutory declaration before a person authorised in accordance with the requirements set out in the Statutory Declarations Act 1835 (such as a solicitor, commissioner for oaths, notary public or justice of the peace). The declaration otherwise contained the correct information and reflected the Company’s genuine solvency.

The Registrar of Companies rejected the declaration as valid due to such non-compliance and (in accordance with s90 Insolvency Act 1986), the MVL was instead treated as a creditors’ voluntary winding up (“CVL“). An application was therefore made to Court, requesting that the winding up be treated as an MVL as originally intended.

The applicants (the liquidator and the Company) accepted that the declaration was invalid,  , but sought to argue that the defect was a procedural one, and could therefore be waived by the Court.

The judge held that the failure was not a mere irregularity – it was a fundamental defect – and thus refused to rescind the CVL.

So, why was the defect fundamental?

ICC Judge Agnello KC considered what parliament’s intention was in relation to s89 IA 1986. The Judge concluded that the provision required those who seek to place a company into MVL to make the requisite declaration before a suitably qualified person.  Although the parties sought to argue that the defect was purely procedural, by analogy to cases such as Perharin the context of an administration appointment, Judge Agnello was not persuaded by this, on the basis that the provisions relating to entering administration and the requirement for a statutory declaration of solvency do not contain the same language.

She emphasised that a statutory declaration under s89 Insolvency Act 1986 carries serious legal consequences, including potential criminal liability if made without reasonable grounds and belief in its truth, further stating that “if this was a waivable defect, then it raises a real issue as to whether the waiving of such a defect also in some way affects the criminal sanctions”. As such, the Judge found that the defect was not capable of being waived, because it was fundamental.

In other words, the declaration of solvency was a nullity, and without a valid declaration, the Company was not in an MVL at all, instead it was in a CVL by operation of law.

The applicants had, in the alternative, sought a recission of the CVL. Judge Agnello disagreed that the Court had jurisdiction under Insolvency Rule 12.59 to make an order for recission, stating that the rule applied only to orders made by the Court and an MVL was not made following court order – further, s112 Insolvency Act did not assist as it did not relate to CVLs. A recission of the CVL was therefore, the Judge concluded, not possible for jurisdictional reasons.

Key Takeaways

For practitioners, directors and lawyers, the decision in Greenbank sends a clear message:

  • A s89 statutory declaration goes to the crux of a MVL
  • It must be sworn before a commissioner for oaths, notary public, solicitor or other authorised person, as defined by Statutory Declarations Act 1835;
  • A defective statutory declaration may not be capable of being retrospectively repaired; and
  • Should the statutory declaration be found to be invalid, the company will be in CVL as provided for in s90 Insolvency Act 1986.