Companies Act 2014 section 501

Protection of creditors and allocation of liabilities

Section 501 protects creditors of companies involved in a division and sets out what happens when liabilities of the transferor company are not clearly allocated in the common draft terms of division.

• Creditors who hold a debt or claim against any company involved in a division at the date the division notice is published have the right to be heard when the court considers whether to confirm the division.
• Where a liability of the transferor company is not allocated by the common draft terms of division, and it is not possible to interpret those terms to work out how it should be allocated, the liability falls jointly and severally on all successor companies.
• Where a liability arises on or after the date of the common draft terms and no provision is made for its allocation, that liability also becomes the joint and several responsibility of all successor companies, unless the court orders otherwise.
• Joint and several liability means that a creditor can pursue any one or all of the successor companies for the full amount owed, rather than being limited to recovering only a proportionate share from each.