Administrators’ appointment by directors invalid
Date: Thursday 19th May, 2011
Author: Chris Laughton
Profile: Chris Laughton
Directors appointing administrators under paragraph 22(2), Schedule B1, Insolvency Act 1986 must give notice of intention to appoint to the company (pursuant to paragraph 26(2), Schedule B1, Insolvency Act 1986 and Rule 2.20(2)(d), Insolvency Rules 1986).
The "record of the decision of the directors" to make the appointment required by Rule 2.22 must be of a valid board resolution in compliance with the requirements of the company's articles at a meeting properly convened with notice.
So found Sir Andrew Morritt (Chancellor) in Minmar (929) Ltd & Teejinder Paul Chohan v Freddy Khalatschi & Martin John [2011] EWHC 1159(Ch), holding the appointment of administrators in that case invalid.
I am grateful to Lawrence Graham for drawing this decision to my attention.
Keywords: directors administrators appointment "para 22" "rule 2.20" "rule 2.22" Minmar "notice of intention"
Please note that the opinions expressed in this blog represent the views of the author and not the views of Mercer & Hole.
Discussion and Comments
By Carl Mifflin on Monday 23rd May, 2011
Chris
This is clearly a critical judgement for many administration appointments, both with regard to the requirement to convene a meeting and also to serve the company where the appointment is by the directors. On this point, the judgement conflicts completely with the 2010 decision in Hill and Pope v Stokes plc [2010] EWCH 3726 in which the Court held that there was no requirement by the directors to serve notice of intention on the company where there was no QFC. This is clearly going to have to be the subject of leglslative amendment (and urgently) or Court of Appeal review to clarify the position.
By cpa edison nj on Tuesday 5th July, 2011
Business men should be aware of this clause. It will benefit them to know this beforehand before making any prior decisions. Great post even if short.