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Eifell Steel Works LTD: Obligation On Directors To Give Notice When Appointing Administrators

In the recent case of Re Eiffel Steel Works Limited [2015] EWHC 511 (Ch) the High Court held that directors’ appointment of administrators remained valid notwithstanding their failure to serve formal notice of intention to appoint on Eiffel (for the benefit of its members) under paragraph 26.2 of Sch B1 to the Insolvency Act 1986 and Rule 2, point 20(2) of the Insolvency Rules 1986.

Eiffel carried on a business as a subcontractor manufacturing structural steel works but it was operating at a loss. The directors resolved to appoint joint administrators. However, no formal notice of intention to appoint the joint administrators was served on Eiffel’s members. On an application by Eiffel and the joint administrators for a declaration that the joint administrators’ appointment was valid, the High Court decided on the facts that the failure to give formal notice to Eiffel’s members did not result in the administration being declared a nullity and that the failure to give notice was a remediable defect.

There have been a number of conflicting decisions as to this issue and, at the time of writing, it remains subject to any appeal to the Court of Appeal.