Angel Group Ltd & Ors, Re.

Where companies in administration are unable to pay their debts and it is just and equitable to wind them up, the court may use the statutory machinery to appoint proposed liquidators as short-term administrators and then appoint them as liquidators on the making of the winding-up orders. In unusual circumstances, procedural requirements may be waived where creditors have received sufficient notice and strict compliance would serve no practical purpose.

The court may direct joint liquidators under section 168(3) of the Insolvency Act 1986 to follow a memorandum of understanding allocating responsibilities and managing actual or perceived conflicts. Administrators will generally be discharged under paragraph 98 of Schedule B1 when they cease to act, subject to the paragraph 75 safeguard. Complexity or seriousness of allegations does not ordinarily justify indefinite postponement of discharge.

Eight companies in the same property-owning group were in administration. The Bank of Scotland was the secured creditor, while Ms Davey and her company asserted claims against the bank and alleged misconduct and conflicts involving the administrators.

All parties agreed that the companies should enter compulsory liquidation, that the existing administrators should leave office, and that four proposed liquidators should be appointed, two nominated by the bank and two by Ms Davey. The applications raised questions concerning the route to appointing the liquidators, the court’s jurisdiction to approve a memorandum of understanding, and the timing of the existing administrators’ discharge under Schedule B1.

1. Winding up and appointment. The court found that each company was unable to pay its debts and that it was just and equitable for each to be wound up under section 122(1) of the Insolvency Act 1986. Although a compulsory winding up would ordinarily involve the Official Receiver under sections 136(2) and 139, Re Exchange Travel [1992] BCC 954 established that the court had no general power to appoint a different liquidator directly. The sensible statutory solution was therefore to appoint the four nominees first as administrators under paragraph 103(3)(b) of Schedule B1, with strictly limited functions, and then appoint them as liquidators under section 140.
2. Procedural directions. In the unusual circumstances, the court waived or treated as satisfied certain notice, advertising, registration and reporting requirements under Rules 2.116, 2.127, 2.128 and 4.7(10) of the Insolvency Rules. Creditors had been notified and kept informed, so strict compliance was unnecessary.
3. Memorandum of understanding. Section 168(3) of the Insolvency Act 1986 was the appropriate jurisdiction to direct the proposed joint liquidators to enter into and comply with the MOU. It allocated responsibility between the two teams, regulated access to documents and privilege, addressed remuneration and expenses, and provided mechanisms for resolving disputes and varying the directions. The arrangement was a pragmatic means of managing potential conflicts, consistent with the approach discussed in Re Arrows Ltd [1992] BCC 121 and Parmalat Capital Finance v Food Holdings Ltd [2008] UKPC 23.
4. Discharge of administrators. Paragraphs 98 and 75 of Schedule B1 created a framework under which administrators would generally be discharged from liability for their acts once they ceased to act. Subsequent claims concerning alleged misconduct required an application under paragraph 75 and permission of the court. The usual practice of delaying discharge allowed time for investigation, as explained in Re Hellas Telecommunications (Luxembourg) II SCA (in administration) [2013] 1 BCLC 426. The complexity of the proposed claims, possible limitation issues and anticipated costs did not justify postponing discharge for three years or indefinitely. Discharge was ordered on the administrators’ proposed terms, subject to the stated six-month qualification.