Where a notice of intention to appoint an administrator is filed, but no appointment is made within the prescribed time limit of ten business days, this does not prevent a fresh notice of intention to appoint from being filed and served, resulting in another appointment window during which an interim moratorium is in place.
The directors of Cornercare Limited ("Cornercare") applied to court for a ruling that they were at liberty to appoint an administrator out of court, by filing a notice of intention to appoint an administrator. The directors had previously filed a notice of intention to appoint an administrator, but the appointment had not been made within ten business days of filing, which is the time limit prescribed under Schedule B1 of the Insolvency Act 1986. Schedule B1 specifically provides that the appointment of an administrator may not be made after the period of ten business days, beginning with the date on which the notice of intention to appoint is filed.
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Where a notice of intention to appoint an administrator is filed, but no appointment is made within the prescribed time limit of ten business days, this does not prevent a fresh notice of intention to appoint from being filed and served, resulting in another appointment window during which an interim moratorium is in place.
The directors of Cornercare Limited ("Cornercare") applied to court for a ruling that they were at liberty to appoint an administrator out of court, by filing a notice of intention to appoint an administrator. The directors had previously filed a notice of intention to appoint an administrator, but the appointment had not been made within ten business days of filing, which is the time limit prescribed under Schedule B1 of the Insolvency Act 1986. Schedule B1 specifically provides that the appointment of an administrator may not be made after the period of ten business days, beginning with the date on which the notice of intention to appoint is filed.
The Court was satisfied that there was a genuine reason why the original appointment by the directors of Cornercare was not made within the prescribed time limit, which was because the proposed buyer suffered delays in obtaining funding for the purchase of new premises.
When the directors made the application, they intended to make an out of court administration appointment, subject to the Court's blessing on the repeated notice of intention point. However, by the time of the hearing, the original plan had been overtaken by events and the directors instead requested that the Court make an administration order. HHJ Purle QC obliged and made the administration order, but he also usefully considered the question of repeated notices of intention to appoint.
The Judge concluded that the relevant paragraph (para 28) of Schedule B1, which prohibits the appointment of an administrator after expiry of the ten-business day period from filing a notice of intention to appoint, refers only to the particular notice of intention to appoint that triggered the notice period. The effect of the paragraph is that no appointment may be made out of time pursuant to that particular notice. In the Judge's view, Schedule B1 does not prevent a fresh notice of intention to appoint from being filed and served, resulting in a new ten-business day appointment window. The contrary interpretation would have the effect of barring forever a second notice of intention to appoint, which would not be practical. For example, should the directors be barred from filing a notice of intention to appoint today if, ten years ago, they had filed such a notice that had expired without an appointment being made because a white knight had come to the company's rescue?
The Court noted however the potential for abuse from repeated notices of intention to appoint. Filing a notice of intention to appoint an administrator gives rise to an interim moratorium which subsists until either an appointment is made, or the ten business-day period expires, whichever happens first. By filing repeated notices of intention to appoint, unscrupulous directors could, in theory, bring about consecutive interim moratoria, to the detriment of creditors. However, the Judge considered that the Court already had power to treat this hypothetical behaviour as an abuse of process, for example by restraining the lodgement of further notices unless followed by an actual appointment. It was therefore not a reason to prevent a company filing repeated notices of intention to appoint an administrator for genuine reasons where no abuse was occasioned.
Strictly speaking the Judge's comments on the repeated notices point are not binding because, having made an administration order, he did not need to decide the point. However, his opinion is nevertheless useful and will be of persuasive authority in future cases.
Further reading: Re Cornercare Limited [2010] EWHC 893 (Ch)
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The original publication date for this article was 10/05/2010.
