Thomas Cook Group Plc & Ors, Re

Where a company cannot continue trading, recapitalisation is unavailable and no statutory purpose of administration is reasonably likely to be achieved, compulsory liquidation may be the only appropriate course. The court may dispense with ordinary notice requirements where urgent appointment of office-holders is necessary, notice would serve no useful purpose and delay would cause substantial prejudice. Following a winding-up order, the Official Receiver becomes liquidator automatically under the Insolvency Act 1986. The court may then appoint special managers under section 177 where the nature of the business, property or stakeholders’ interests requires that assistance. The discretion is broad, but must be exercised in light of the liquidator’s supporting report and the statutory requirements.

Directors presented petitions for the immediate winding up of 26 companies within the Thomas Cook Group. The Group faced an acute cash-flow crisis, substantial liabilities and no realistic prospect of recapitalisation or restructuring. The court considered whether continued trading, further negotiations, administration or liquidation was appropriate.

The petitions also sought dispensation with ordinary notice requirements and the appointment of special managers to assist the Official Receiver, including with the urgent repatriation of approximately 145,000 customers abroad. The court further considered the statutory basis for appointing special managers.

1. Winding up. The court granted the petitions and made immediate winding-up orders for all 26 Companies. Continued trading without recapitalisation was not viable because the Companies were expected to run out of money and it would be inappropriate to incur further liabilities. Further negotiations were not viable because no sufficiently supported deal existed.
2. Administration. An administration order could be made only if one of the statutory purposes of administration was reasonably likely to be achieved. None was reasonably likely: rescue as a going concern, achieving a better result for creditors than liquidation, or realising property for secured or preferential creditors.
3. Liquidator. On the making of the orders, the Official Receiver became liquidator automatically by virtue of section 136 of the Insolvency Act 1986.
4. Dispensation with notice. The court dispensed with the ordinary notice requirements. The situation was exceptionally urgent, office-holders had to be appointed without a gap, the petitions were brought by the directors and no credible opposition or funding proposal existed. Delay would materially prejudice the repatriation operation and the protection of customers, employees and other stakeholders. The court noted that immediate orders had been made in Re Carillion plc and Re British Steel Ltd.
5. Special managers. Section 177 of the Insolvency Act 1986 conferred a broad discretion to appoint a person to manage the company’s business or property. Under section 177(2), the application was made by the liquidator, and rule 7.93(1) of the Insolvency (England and Wales) Rules 2016 required a supporting report. Those requirements were satisfied, and the appointment of AlixPartners LLP and KPMG LLP as special managers was appropriate.