Avoiding administration

In re GHE Realisations Ltd (in administration) ChD TLR 11 November

Joint administrators of an insolvent company decided that it was not reasonably practicable to achieve a rescue of the company and they would be likely to achieve a better result for the company’s creditors as a whole if the company were to be wound-up without first being in administration. They proposed that, subject to making a distribution to creditors under paragraph 65(3) of Schedule B1 to the Insolvency Act 1986, they should give notice to the Registrar of Companies under paragraph 84(1) of Schedule B1, with the intention of thereby bringing their appointment to an end and achieving the dissolution of the company The court said that in principle this exit route was open to the administrators and the making of the proposed distributions to non-preferential unsecured creditors was in the best interest of the creditors as a whole and granted permission under paragraph 65(3). However, a question arose as to the meaning in paragraph 84(1) of: ‘if the administrator … thinks that the company has no property, which might permit a distribution to its creditors … we shall send a notice to that effect to the Registrar of Companies.’ If the words mean that a distribution having already been made, the administrator thought that the company had no further property, which might permit a distribution, or that the company never had nor during the administration ever had any property, which might permit a distribution? Language was in the present tense, therefore whether the company had assets, which had previously being distributable and distributed, was immaterial. Accordingly, once the permitted distributions had been made, if the administrators thought that the company had no further distributable assets, they were under a duty to serve a paragraph 84(1) notice, but subject always to their discretion to make an application to the court under paragraph 84(2).