Antic Design Ltd, Re

An administration order may be made where the company is insolvent and administration is reasonably likely to achieve a better outcome for creditors than immediate liquidation. The court may rely on credible financial evidence, including proposed contributions, waivers of debts and savings in administration costs. Where the statutory objective is established and no discretionary reason exists to refuse relief, the order should be made.

Antic Design Ltd provided design and build services and had been destabilised by the failure of a connected company to pay a substantial debt. HMRC had presented a petition for unpaid national insurance contributions and associated taxes attributable to persons working for the company. The company accepted that the petition could not be resisted.

The sole director applied for an administration order while the winding-up petition was adjourned. HMRC did not oppose the application. The central issue was whether the company was insolvent and whether administration was reasonably likely to produce a better result for creditors than immediate liquidation.

1. Application granted. The company was both cash-flow and balance-sheet insolvent. The undisputed HMRC petition demonstrated inability to pay debts, and the connected company’s inability to pay its debt supported the balance-sheet conclusion.
2. The statutory administration objective was reasonably likely to be achieved. The court accepted the proposed administrators’ estimated outcome statement and opinion as sound. Relevant factors included a significant saving on the Insolvency Services account compared with liquidation, the sole director’s waiver of his loan account, his proposed injection of £150,000 into the administration estate, and an anticipated waiver of £42,341 by an unconnected creditor.
3. Those matters supported an anticipated dividend of more than 25 pence in the pound in administration, compared with approximately 4 pence in a compulsory liquidation. The possible waiver of further inter-company indebtedness was not taken into account.
4. There was no discretionary reason to withhold the order. The director’s proposed financial contribution and waiver were commendable conduct which supported making the order.
5. The administration order was made at 10.50 am. The judge stated that the winding-up petition would ordinarily be dismissed as the inevitable consequence of the administration order, with the petitioning creditor’s costs treated as an expense of the administration, but the parties indicated that the petition would be dealt with at the subsequent hearing.