Companies In Administration: Limitation Clock Did Not Stop
Limitation periods are a vital consideration for all parties caught up in commercial disputes. Miss the cut off and your claim could be time-barred.
The court has now clarified that time does not stop running on claims against a company when it goes into administration. This ruling is important because it’s the first time the court has ruled on whether the position changed when the Enterprise Act 2002 came into force.
Statutory limitation periods, within which legal proceedings must commence or be time-barred, are important because they prevent the parties from having the constant prospect of a potential legal claim for many years (or longer). It’s a matter of fairness and public policy.
Even so, where there is a dispute and the limitation period has expired, the court can extend the limitation period in certain circumstances, allowing the claim to proceed. Commercial contracts often include a shorter time period than set out in the Limitation Act, after which a claim would be time barred.
In this commercial dispute case, where competing claims were made by two companies (both now in liquidation), one of the issues concerned the contractual limitation period. One of the companies (CNG) had supplied gas to another company (ZOG) under an agreement in which various limitation clauses included a contractual limitation period of 12 months.
In late 2021, the companies went into liquidation and each submitted proofs of debt which the other challenged. ZOG relied on the contractual limitation period to resist part of the claim.
No change
It is settled law that when a company enters compulsory liquidation, time ceases to run for limitation purposes from the making of the winding up order. The same applies when a company enters voluntary liquidation.
Here, the court had to determine the legal position for companies in administration on the running of time for limitation purposes post-Enterprise Act.
CNG’s liquidators argued that time ceased to run when ZOG entered into administration on the basis that the nature of administration had changed since the Enterprise Act 2002 to include a distribution process. ZOG’s liquidators argued that had Parliament intended the 2002 Act to change the law as to the running of time in an administration, it would expressly have said so.
The High Court concluded that the 2002 Act did not alter the position on limitation - time does not stop running when a company enters administration. However, it does stop running when a company moves from administration into creditors voluntary liquidation (CVL). This meant that CNG could only continue its claim against ZOG for the parts of the invoices that were not time-barred.
If you are involved in a commercial dispute, always keep limitation periods in mind to protect your commercial interests.
1Contract Natural Gas Limited (In Liquidation) v Zog Energy Limited (In Liquidation) [2025] EWHC 86
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