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Interim orders on administration applications

The recent decision in Re Bowen Travel Ltd [2012] EWHC 3405 (Ch) relied on the provisions of paras 13 (1)(d) and 13(3), Schedule B1, Insolvency Act 1986 that on hearing an administration application the court may make an interim order, which may, in particular, restrict the exercise of a power of the directors or the company and/or make provision conferring a discretion on the court or on a person qualified to act as an insolvency practitioner in relation to the company.  The consequence was an order appointing insolvency practitioners as managers with all the powers of administrators and relieving the directors of their powers.  The reason for the order was, in essence, that the court was inclined to make a winding-up order (there was an extant petition), but there was an urgent need in the interests of creditors to deal with certain of the company’s business and assets.

Similar situations have arisen in earlier cases.  In Re a company (No 00175 of 1987) [1987] BCLC 467 Vinelott J appointed an IP to manage the property and affairs of the company whilst a charge holder decided whether to appoint a receiver.  Again there was a commercial urgency to act in the interests of creditors.

In WF Fearman Ltd [1988] BCC 139, a case I recollect as I was the IP’s case manager, Harman J considered making an interim order on the administration application, but decided instead to appoint a provisional liquidator in the winding-up petition, largely because our initial enquiries revealed that there would be nothing to be gained by administration.  We went on to be special managers and, subsequently, liquidators.

In Gallidoro Trawlers Ltd [1991] BCLC 411 Harman J restricted the powers of the directors and the company so as to prohibit them from dealing with the company’s assets other than in the normal course of business, unless they had the consent of a nominated IP or the court.

Finally, in Re SB Corporate Solutions Ltd [2011] EWHC B25 (Ch) HHJ McCahill QC reviewed this area of the law in some detail on a challenge to the earlier appointment of IPs to manage the company’s affairs.  The administrators of a related company had applied for an administration order and for their own appointment as interim managers of the company as a result of concerns about the possible dissipation of assets.  They wished to preserve the company’s business (to sell it) and sought a “less draconian approach” than provisional liquidation.  The interim managers were given the directors’ powers and the directors were forbidden to exercise any powers.  On review, the interim order was approved, although it was noted that references to “interim administrators” had beeb inappropriate and unhelpful, there being no such creature:  the insolvency practitioners were appointed (as officers of the court) to manage the company’s affairs with the powers of directors.

To conclude, interim orders on an administration are a flexible tool to permit a company’s affairs to be managed when there is an urgent need to do so prior to administration (or liquidation).

 

 

Date: 11th February, 2013
Author: Chris Laughton

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