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Administrators

Administration is an alternative to liquidation, for which legislation is now contained in Schedule B1 to the Insolvency Act 1986.

Custody and control of a company’s assets is handed to an Administrator (a suitably qualified Insolvency Practitioner) for a period of one year which may be extended. The Administrator must act quickly and efficiently to give effect to the interest of the creditors, and may do anything “necessary or expedient for the management of the affairs, business and property of the company”.

Administration has a prescribed list of objectives: to rescue the company as a going concern, to achieve a better result than winding up and, only if those priorities cannot be achieved, to realise property for distribution to creditors.

A company may be placed into administration by the Court on an application by the company, its directors or creditors, or by a Magistrates Court recovering fines. A creditor with a qualifying floating charge may appoint an administrator without the Court’s intervention if the charge itself permits it.

In Re. TPS Investments (UK) Ltd [2018] EWHC 360 (Ch), HHJ Stephen Davies emphasised that an application to remove an Administrator should only be made after careful consideration, deprecating the application before him as tactical and precipitate. Consistent with the overriding objective, he concluded that “such applications should never be made without careful consideration of the position and an attempt made, by both sides acting co-operatively, to proceed in a constructive and time and cost-efficient manner. Instead the application has served only to waste time and costs and make the resolution of matters generally more difficult”.

A minor defect in giving notice of appointment to creditors was waived in Re. BXL Services Ltd [2012] EWHC 1877 (Ch), the Court adopting a purposive approach. This was contrary to the earlier stricter view taken in Minmar Ltd v Khalastchi [2011] EWHC 1159 (Ch).

Re. Care People [2013] EWHC 1734 (Ch), concerned the slightly premature appointment of an Administrator according to the terms of a floating charge. HHJ Purle QC concluded that this “is properly characterised as a defective exercise of an undoubted power of appointment, which is procedural in nature but not fundamental to the existence of the power ... I do not consider that the requirement ... is of such fundamental importance as to render the appointment a nullity”.

Whether Administration was likely to achieve a better outcome for creditors than liquidation was considered in Baltic House Developments Ltd v Cheung [2018] EWHC 1525 (Ch). HHJ Eyre QC said: “I remind myself of the comparatively low hurdle that the Applicant has to surmount, but even in the light of that low hurdle, I am not satisfied that it has shown a real prospect of achieving the better result as is required for an order to be made”.

 

Graeme Kirk / 1st Aug 2018


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