Key points

  • The court will be reluctant to make an administration order on the basis of limited information and in the absence of an investigation into the company's affairs.
  • Where the majority of directors opposed the administration order and believed that the viability of the company's business should be investigated, it was not appropriate for the court to grant an administration order.

The facts

This was a sole director's application for administration under paragraph 12 of Schedule B1 to the Insolvency Act 1986.

Subsequently, two shareholders had used their powers in the shareholder agreement to appoint themselves as directors. They opposed the administration application on the basis that the company had sufficient business to continue to trade solvently.

Decision

The administration application was refused. The court had limited information regarding the company's solvency and could not reach a firm view on it.

Whilst on the face of it the company was unable to pay its debts, the two recently-appointed directors had been validly appointed and believed that the viability of the business should be investigated. The court was persuaded to permit that.

Comment

This case is a reminder that the court will need to be persuaded (with evidence) that the company is insolvent and that an administration order is appropriate in all the circumstances. An order will not be made simply because one director alleges that the company is currently insolvent.

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