Nationwide Accident Repair Services Ltd & Ors, Re

A sole director may apply to court for an administration order under paragraph 12(1)(b) of Schedule B1 to the Insolvency Act 1986, even where the company’s articles arguably prevent that director from passing a board resolution because of a quorum requirement. The plural wording includes the singular under section 6 of the Interpretation Act 1978.

The court retains a discretion. It may consider the company’s internal governance, the reason for the sole directorship and the consequences for creditors, but those matters may be outweighed where administration offers a better outcome and there is no realistic alternative to winding up. Urgent insolvency applications must be prepared and presented fairly; contractual deadlines should not artificially pressure the court into abridging the time needed for a proper hearing.

The applicants sought administration orders for nine companies in an accident-repair group. The companies were substantially insolvent, had defaulted under banking facilities and faced an imminent collapse of trading. A pre-pack sale had been agreed in principle, offering a better return to creditors and preserving many jobs, but the sole director’s authority to make the applications was questioned because the articles of most companies arguably required a quorum of two directors.

The court therefore considered whether a sole director had standing under paragraph 12(1)(b) of Schedule B1 to the Insolvency Act 1986, and whether administration orders should be made in the circumstances. It also addressed the manner in which the urgent applications had been brought.

1. Administration orders made. The court appointed administrators of each of the nine companies because the statutory conditions were satisfied. The companies were insolvent, and administration was likely to achieve a better result for creditors than immediate liquidation, including a substantially better return and the preservation of many jobs.
2. Standing of sole director. A sole director may apply to court under paragraph 12(1)(b) of Schedule B1 to the Insolvency Act 1986, even if the company’s articles mean that the director could not alone pass a board resolution authorising the application. The plural expression referring to the directors includes the singular by virtue of section 6 of the Interpretation Act 1978. The court relied on Re Brickvest Limited [2019] EWHC 3084 (Ch) and principle.
3. Exercise of discretion. The court must consider all relevant circumstances, including the reasons for the sole directorship and the effect of the articles on board powers. A governance defect may weigh against relief, but is likely to be outweighed where the director owes duties to the company and its creditors, the company is plainly insolvent, administration produces a better return, and winding up is the only realistic alternative.
4. Urgency. The court criticised the creation of an artificial contractual ultimatum requiring an out-of-hours hearing. The court’s discretion in administration applications is not a rubber stamp. Applicants must allow sufficient time for proper preparation, a fair hearing and judicial decision-making.