Nortel Networks UK Ltd & Ors, Re (Rev 1)

The court may extend an administrator’s term of office where continuation serves the interests of the company’s creditors as a whole. The discretion under paragraph 76(2)(a) of Schedule B1 to the Insolvency Act 1986 is not confined by an express statutory test. Relevant considerations include whether the administration’s purpose remains reasonably likely to be achieved, whether creditors would suffer prejudice, and any creditor views. An extension is ordinarily appropriate where it enables distributions to be completed, avoids the cost and delay of liquidation, or permits administrators to fulfil an approved voluntary arrangement. The court may limit an extension where wider legal uncertainty makes a longer period imprudent.

The joint administrators applied to extend their appointments over NNUK and 18 other Nortel Group companies for a further 12 months. The administrations had produced substantial recoveries, distributions were ongoing, and several companies were operating under company voluntary arrangements. Further work remained, including resolving expense and inter-company claims, making distributions, completing a proposed arrangement for Nortel Networks S.A., and dissolving companies in their places of incorporation.

The application arose against uncertainty about the effect of the United Kingdom’s proposed withdrawal from the European Union on recognition of the administrations and voluntary arrangements under the EU insolvency regulations. The central questions were whether continuation remained in creditors’ interests and what period of extension was appropriate.

1. Application granted. The administrators’ terms of office were extended for one year, to 13 January 2019.
2. Under paragraph 76(2)(a) of Schedule B1 to the Insolvency Act 1986, the court’s discretion is not expressly circumscribed. It must nevertheless be exercised in the interests of the company’s creditors as a whole and with regard to all the circumstances.
3. Relevant considerations include whether the purpose of the administration remains reasonably likely to be achieved, any prejudice to creditors, and creditors’ views. Where distributions are being made, continuation may be preferable to liquidation if liquidation would increase costs or cause delay without countervailing benefit.
4. The evidence established that continuation was necessary or useful to complete proof and distribution processes, administer approved company voluntary arrangements, resolve expense and inter-company claims, and propose a voluntary arrangement for NNSA. Liquidation would cause disruption, additional costs and delay, while creditors would suffer no corresponding prejudice.
5. The court considered a one-year extension prudent because of uncertainty over the post-withdrawal operation and recognition of the EU insolvency regulations. Further directions could be sought in late 2018 for any administration likely to continue beyond the extension period.

The judgment records earlier orders in the same administrations, including a previous extension to 13 January 2018 ([2015] EWHC 3618 (Ch)), authority for distributions and CVAs ([2015] EWHC 2506 (Ch)), permission relating to the Global Settlement ( [2016] EWHC 2769 (Ch)), and directions concerning administration expense claims ( [2017] EWHC 1429 (Ch)). This was a further first-instance application, not an appeal.