AMCD (Property Holdings Ltd.), Re

An administration order requires satisfaction of both statutory conditions: the company must be likely to become unable to pay its debts, and the administration must be reasonably likely to achieve its purpose. A disputed debt does not establish balance-sheet insolvency, and evidence of cash-flow insolvency must address when liabilities fall due. Where the proposed administration merely seeks to recover an asset at a late stage of a project, the court may conclude that administration offers no better prospect than liquidation and is being used to delay a winding-up petition.

AMCD (Property Holdings Limited) was a special purpose vehicle managing a nearly completed property development for Toha Properties Limited. A consultant, Mr Gower, had served a statutory demand and presented a winding-up petition concerning a disputed debt of approximately £100,000.

The company’s sole director applied for an administration order. The evidence suggested that the proposed administration would involve recovering a debt allegedly owed by Toha. The court considered whether the company was likely to become unable to pay its debts and whether the purpose of administration was reasonably likely to be achieved.

1. Application refused. The court held that there was no jurisdiction to make an administration order because the evidence did not establish that the company was likely to become unable to pay its debts.
2. The company’s estimated statement of affairs showed assets and liabilities of approximately £750,000. The liabilities included the directors’ loan account and Mr Gower’s disputed claim. Since the debt was disputed on substantial grounds, it could not establish balance-sheet insolvency for this purpose. The assertion of cash-flow insolvency also failed because there was no evidence of when the directors’ loans were due, if they were due at all.
3. The court further held that the proposed administration was not reasonably likely to achieve its purpose. The only apparent purpose was to recover the debt allegedly owed by Toha Properties Limited. The building project was approximately 95 per cent complete, and AMCD was a project manager rather than the building contractor. The court saw no better prospect of recovery through an administrator than through a liquidator.
4. The timing and limited evidence supported the inference that the application was a last-minute attempt to avoid the consequences of the winding-up petition. If the company had substantial grounds for disputing the debt, the petition would be dismissed; otherwise, it would proceed.