Officeserve Technologies Ltd, Re

Although the statutory threshold for an administration order may be met, the court retains a discretion to refuse the order where administration would remove a liquidator’s access to potentially important remedies. In particular, substantial post-petition dispositions may engage Insolvency Act 1986, s.127. The court should consider whether administration would actually produce a better result for creditors if those dispositions could not be challenged. A liquidation does not necessarily require an immediate cessation of trading: a liquidator may, where appropriate, continue the business or realise value through a subsidiary.

The directors of an insolvent company providing food-delivery services through IT platforms applied for the appointment of an administrator. They contended that administration would preserve goodwill and achieve a better result for creditors than liquidation. Creditors opposed the application. The company had received and spent substantial sums after presentation of a winding-up petition, including share investment and a VAT refund. The central issue was whether the court should exercise its discretion to make an administration order despite the possible consequences of those post-petition dispositions and the availability of liquidation.

1. Administration purpose. The evidence established insolvency and was sufficient, at the low statutory threshold, to show that administration might achieve a better result for creditors than liquidation. An alternative administration purpose, involving distribution to secured creditors, was also available.
2. Discretionary refusal. The court nevertheless declined to make an administration order. Substantial sums had been disposed of after presentation of the winding-up petition. Those dispositions might be void under s.127 of the Insolvency Act 1986, which does not depend on extravagance or other wrongdoing. Its purpose includes protecting pari passu distribution in a liquidation. Replacing a liquidator with an administrator could remove the office-holder’s access to that remedy and might therefore prevent, rather than secure, a better result for creditors.
3. Continuation of trading. It was material that a liquidator can in an appropriate case carry on the company’s business. Much of the trading appeared to occur through a subsidiary, so a liquidator might permit that trading to continue while realising the value of the subsidiary’s shares. The court referred to Re Brown Bear Foods Ltd Shaw v Webb and others [2014] EWHC 1132 (Ch) as an example of a provisional liquidator being appointed with full powers, including power to sell the business, where post-petition dispositions caused concern.
4. The administration application was dismissed. The pending winding-up petition remained before the Bristol District Registry; no formal application to transfer it had been made.