Baker & Anor v London Bar Company Ltd

A purported out-of-court appointment of administrators is invalid where the directors’ meeting was not properly convened because a director was not given effective notice. A majority of directors cannot rely on paragraph 105 of Schedule B1 to the Insolvency Act 1986 to cure that defect. The provision does not override the ordinary rules governing the constitution and conduct of directors’ meetings. A fresh administration application by a qualifying floating charge holder may nevertheless be granted where the statutory requirements are satisfied and administration is appropriate.

The applicants, insolvency practitioners, sought a declaration concerning their purported appointment as joint administrators of London Bar Company Ltd. Three of the company’s four directors had purportedly resolved to appoint administrators, but the fourth director had not received effective notice of the board meeting. The company’s articles contained no provision permitting the meeting to proceed in those circumstances.

The court considered whether paragraph 105 of Schedule B1 to the Insolvency Act 1986 validated the decision because it had been made by a majority of the directors. A separate application by Lloyds TSB Bank PLC, as holder of a qualifying floating charge, sought an administration order.

1. The purported out-of-court appointment was invalid. The board meeting was not properly convened because effective notice had not been given to one of the directors. Under ordinary company law, the meeting was invalid and ineffective to authorise the appointment.
2. Paragraph 105 of Schedule B1 did not cure the defect. Although it provides that references to something done by the directors include the same thing done by a majority of the directors, it does not override the ordinary provisions governing the proper constitution and conduct of directors’ meetings. The court respectfully agreed with the approach in Minmar (929) Ltd v Freddie Khalastchi [2011] EWHC 159 (Ch), where the same issue had been considered.
3. There was therefore no subsisting administration arising from the purported appointment, and the two proposed administrators were not validly in office.
4. The secured creditor’s fresh application under paragraph 35 of Schedule B1 was properly made and free from the defect affecting the earlier appointment. The evidence supported the conclusion that administration was appropriate, particularly given the urgency of a proposed sale of the company’s public house before rent became due.
5. An administration order was accordingly made appointing the same two individuals as joint administrators.