Following two recent contradictory judgements in the High Court given on the same day, there is further confusion over the correct procedure over the appointment administrators to a company by means of the so-called “out of court” procedure. The problem arises only where there is no debenture holder having a qualifying floating charge (QFC) as the Insolvency Rules (the Rules) are open to different interpretations as to what notices are required to be given by the directors and to whom.

In one case, called National Westminster Bank v Msaada Group, the court decided that the appointment of the administrators was invalid because no prior formal notice of the appointment was given to the parties referred to in Rule 2.20 of the Rules (including the company itself). In the other case, Re Virtualpurple Professional Services Ltd, the judge decide that in a case where there was no QFCH the failure to give notice to the parties referred to in the Rule did not make the appointment of the administrators invalid and went further stating that in such a case there was no need to give the notices specifed in the Rule. In cases where there is a QFC holder the position is clear that notice must be given to the parties referred to in Rule 2.20, including the company itself.

In order to cut through these apparently conflicting judgments and for more information please contact Richard Baines, Head of Turnaround, Restructuring & Insolvency, email: r.baines@druces.com