united-kingdom liability bankruptcy
What happens to a company&#39;s negative value property if it is liquidated?
<p>What happens to annoying burdensome assets during a company's liquidation?</p>

<p>Perhaps a company owns <a href="https://en.wikipedia.org/wiki/Giant_Mine" rel="nofollow noreferrer">a mine filled with deadly arsenic trioxide </a> waiting to break out into the environment, or something more boring like a <a href="https://en.wikipedia.org/wiki/St_Peter%27s_Seminary,_Cardross" rel="nofollow noreferrer">useless grade A listed building</a> that must be maintained.</p>

<p>These aren't just debts that be cancelled. So what's meant to happen?</p>

<p>In the U.K., <a href="https://en.wikipedia.org/wiki/Bankruptcy_in_the_United_Kingdom" rel="nofollow noreferrer">bankruptcy law</a> applies to individuals and partnerships, while the <a href="https://en.wikipedia.org/wiki/United_Kingdom_insolvency_law" rel="nofollow noreferrer">U.K. insolvency law</a> applies to companies. In an insolvency proceeding, there is administration (the rough equivalent of a Chapter 11 Bankruptcy in the U.S.)or a liquidation (the rough equivalent fo a Chapter 7 Bankruptcy in the U.S.).</p>

<p>In administration, the administrator of the company renegotiates debt payments so that carrying costs of office buildings can be brought to less than rental income, if possible, and if not, or if it is a liquidation in the first place, sells the building at auction to the highest bidder and stiffs unpaid creditors if this is not enough to pay them all according to priority and pro rata within each priority ranking. Simple.</p>

<p>Negative value property is trickier. Sometimes someone can be paid to take it over (this happens often with depleted oil and gas wells that have to be plugged), if there are sufficient funds to do so. The administrator may instead <a href="http://www.legislation.gov.uk/ukpga/1986/45/part/IX/chapter/IV/crossheading/disclaimer-of-onerous-property/2006-04-03" rel="nofollow noreferrer">disclaim the property</a>.</p>

<blockquote>
  <p>A disclaimer under this section— (a)operates so as to determine, as
  from the date of the disclaimer, the rights, interests and liabilities
  of the bankrupt and his estate in or in respect of the property
  disclaimed, and (b)discharges the trustee from all personal liability
  in respect of that property as from the commencement of his
  trusteeship, but does not, except so far as is necessary for the
  purpose of releasing the bankrupt, the bankrupt’s estate and the
  trustee from any liability, affect the rights or liabilities of any
  other person.. . . (5)Any person sustaining loss or damage in
  consequence of the operation of a disclaimer under this section is
  deemed to be a creditor of the bankrupt to the extent of the loss or
  damage and accordingly may prove for the loss or damage as a
  bankruptcy debt.</p>
</blockquote>

<p>Basically, a court decides what to do with it. If no one claims it and it has been disclaimed by the administrator, it <a href="https://en.wikipedia.org/wiki/Escheat" rel="nofollow noreferrer">escheats</a> to the Crown (i.e. the U.K. state) as it would if a decedent's estate with no creditors or heirs. </p>

<p>This disclaimer process is similar to the process in Australia described in the answer by @DaleM and has the same name in U.K. law as it does in Australia.</p>

<blockquote>
  <p>Escheat can still occur in England and Wales, if a person is made
  bankrupt or a corporation is liquidated. Usually this means that all
  the property held by that person is 'vested in' (transferred to) the
  Official Receiver or Trustee in Bankruptcy. However, it is open to the
  Receiver or Trustee to refuse to accept that property by disclaiming
  it. It is relatively common for a trustee in bankruptcy to disclaim
  freehold property which may give rise to a liability, for example the
  common parts of a block of flats owned by the bankrupt would
  ordinarily pass to the trustee to be realised in order to pay his
  debts, but the property may give the landlord an obligation to spend
  money for the benefit of lessees of the flats. 
  <strong>The bankruptcy of the
  original owner means that the freehold is no longer the bankrupt's
  legal property, and the disclaimer destroys the freehold estate, so
  that the land ceases to be owned by anyone and effectively escheats to
  become land held by the Crown in <a href="https://en.wikipedia.org/wiki/Demesne#Royal_demesne" rel="nofollow noreferrer">demesne</a>.</strong> This situation affects a few
  hundred properties each year.</p>
  
  <p><strong>Although such escheated property is owned by the Crown, it is not part
  of the Crown Estate, unless the Crown (through the Crown Estate
  Commissioners) 'completes' the escheat, by taking steps to exert
  rights as owner.</strong> However, usually, in the example given above, the
  tenants of the flats, or their mortgagees would exercise their rights
  given by the Insolvency Act 1986 to have the freehold property
  transferred to them. This is the main difference between escheat and
  bona vacantia, as in the latter, a grant takes place automatically,
  with no need to 'complete' the transaction.</p>
</blockquote>

<p>Thus, the toxic property would escheat to the Crown, but not the <a href="https://en.wikipedia.org/wiki/Crown_Estate" rel="nofollow noreferrer">Crown Estate</a> (defined below, which would not claim it since it has no value) and no one else would claim it. So, it would be technically owned by the government but not administered by anyone, unless the government affirmatively decided to do so.</p>

<blockquote>
  <p>The Crown Estate is a collection of lands and holdings in the United
  Kingdom belonging to the British monarch as a corporation sole, making
  it the "Sovereign's public estate", which is neither government
  property nor part of the monarch's private estate. As a result of this
  arrangement, the sovereign is not involved with the management or
  administration of the estate, and exercises only very limited control
  of its affairs. Instead, the estate's extensive portfolio is
  overseen by a semi-independent, incorporated public body headed by the
  Crown Estate Commissioners, who exercise "the powers of ownership" of
  the estate, although they are not "owners in their own right". The
  revenues from these hereditary possessions have been placed by the
  monarch at the disposition of Her Majesty's Government in exchange for
  relief from the responsibility to fund the Civil Government. These
  revenues thus proceed directly to Her Majesty's Treasury, for the
  benefit of the British nation. The Crown Estate is formally
  accountable to the Parliament of the United Kingdom, where it is
  legally mandated to make an annual report to the sovereign, a copy of
  which is forwarded to the House of Commons.</p>
  
  <p>The Crown Estate is one of the largest property managers in the United
  Kingdom, overseeing property worth £12 billion, with urban properties
  valued at £9.1 billion representing the majority of the estate by
  value. These include a large number of properties in central London,
  but the estate also controls 792,000 ha (1,960,000 acres) of
  agricultural land and forest and more than half of the UK's foreshore,
  and retains various other traditional holdings and rights, including
  Ascot Racecourse and Windsor Great Park. Naturally occurring gold and
  silver in the UK, collectively known as "Mines Royal", are managed by
  the Crown Estate and leased to mining operators.</p>
</blockquote>

<p>Also, while not strictly on point, the <a href="https://en.wikipedia.org/wiki/Environment_Agency" rel="nofollow noreferrer">Environment Agency</a> in the U.K. may criminally prosecute people who were involved in breaking the environmental laws in question, if they are still living. </p>

<p>(In Colorado, where I live, most toxic mines date to the 19th century, were abandoned, everyone who was personally involved with them is dead, and the state and federal EPA try to clean them up as funds become available, sometimes making the problem worse due to unexpected mishaps that occur in the cleanup process.)</p>

<p>In Australia, Division 7A of Part 5.6 of the <a href="http://www6.austlii.edu.au/cgi-bin/viewdb/au/legis/cth/consol_act/ca2001172/" rel="nofollow noreferrer">Corporations Act</a>, titled "Disclaimer of Onerous Property" deals with this.</p>

<p>In essence, it allows the liquidator to abandon any claim to the property on behalf of the company. The process is:</p>

<ul>
<li>the liquidator gives notice of the intent (s568A)</li>
<li>anyone with an interest in the disclaimed property has 14 days to apply to the court to stop the disclaimer (s568B). If they do, the court can set it aside provided that it would cause the aggrieved person "prejudice that is grossly out of proportion to the prejudice that setting aside the disclaimer would cause the company's creditors" and make other orders.</li>
<li>If there is no objection or the court decides to allow the disclaimer anyway the company's interest in the property ends. Anyone aggrieved by this becomes an unsecured creditor of the company to the extent of their loss (s568D).</li>
<li>With the leave of the court, a person may apply for the disclaimer to be set aside if it was unreasonable for them to have applied beforehand (s568E). </li>
<li>The court will then dispose of the property by ordering a person to become the owner (s568F). A "person entitled to the property" or "a person to whom it seems to the Court appropriate for the property to be vested or delivered" or "a trustee" for one of those persons. For real property, this will probably be the government who is responsible for the land it sits on.</li>
</ul>
