Seven Energy International Ltd

For an administration order, the court must be satisfied that the statutory purpose of administration is reasonably likely to be achieved. That inquiry may involve assessing whether a proposed restructuring has a real prospect of implementation, even where foreign law or contractual restrictions might be invoked to obstruct it.

The court need not finally determine the effect of foreign legislation. It may assess the practical likelihood that affected parties will invoke it and the prospects of obtaining effective relief. Similarly, contractual restrictions do not necessarily prevent an administration where an injunction would probably protect no legitimate interest and damages would be nominal.

The directors of Seven Energy International Limited applied for an administration order under paragraph 12(1)(b) of Schedule B1 to the Insolvency Act 1986. The company was incorporated in Mauritius and was found to be cash-flow and balance-sheet insolvent.

The proposed administration involved a restructuring intended to produce a better result for creditors than an immediate winding up. Potential obstacles included section 130 of the Mauritian Companies Act 2001 and restrictions in an amended and restated consolidated securityholders’ agreement. The central issue was whether implementation of the restructuring was reasonably likely despite those possible obstacles.

1. Administration order granted. The court was satisfied that the company was unable, or likely to become unable, to pay its debts under paragraph 11(a) of Schedule B1 to the Insolvency Act 1986. It was also satisfied under paragraph 11(b) that an administration order was reasonably likely to achieve the purpose of administration in paragraph 3, namely a better result for the company’s creditors as a whole than an immediate winding up.
2. Following Re Harris Simons Construction Ltd [1989] 1 WLR 368, the relevant inquiry was whether there was a real prospect that the administrator would be able to implement the restructuring. The court did not have to determine conclusively the effect of section 130 of the Mauritian Companies Act 2001. It had to assess the practical likelihood that shareholders would rely on that provision and obtain relief preventing implementation.
3. The shareholders had been informed of the proposal and the hearing, but had not attended or raised the section 130 objection. They were unlikely to gain a meaningful benefit from blocking the restructuring, and it was uncertain both that they would take action and that they would succeed if they did.
4. Similar considerations applied to restrictions in the securityholders’ agreement. Even assuming that the restructuring would breach the relevant provisions, the securityholders were unlikely to obtain an injunction. The material did not show a pre-existing legitimate interest requiring protection, and any damages were likely to be nominal.
5. The court therefore concluded that there was a real prospect of implementation and that paragraph 11(b) was satisfied. In exercising its discretion under paragraph 13 of Schedule B1, the arguments favoured making the order. An administration order was made with effect from noon on 13 November 2019.

Not stated in the judgment.