In the Matter of Cargologicair Limited

For an administration order, the company must be unable, or likely to become unable, to pay its debts, and the court must consider it reasonably likely that the administrators will achieve at least one statutory objective. This requires a realistic chance, not a probability exceeding 50 per cent. A company may be balance-sheet solvent yet cash-flow insolvent. In a sanctions context, administration may be appropriate where independent office-holders can preserve assets, operate lawfully under licences, pursue a sale or rescue, or secure a better result for creditors than an immediate winding up. The court may also order immediate sealing where administrators need to take control promptly and the necessary sanctions arrangements are sufficiently likely to be obtained.

The sole director of CargoLogicAir Limited applied for an administration order. The company and its parent were subject to UK asset-freezing sanctions because of the majority shareholder’s sanctioned status. Its only bank account was due to close, payments to creditors and employees were substantially delayed, its aircraft had been repossessed, and its operating licences were at risk.

The application also sought authority for the proposed administrators to use the Insolvency Services Account. The central issues were whether the company was unable, or likely to become unable, to pay its debts; whether administration was reasonably likely to achieve a statutory objective; and whether the order should be sealed immediately.

1. Administration order granted. The company was presently unable to pay its debts despite potentially being balance-sheet solvent. It was cash-flow insolvent because substantial debts were overdue and the closure of its only bank account would prevent further payments.
2. The court applied the statutory requirement that an administration objective be reasonably likely to be achieved. This required a real or realistic prospect, not a greater than 50 per cent chance. The proposed administrators were reasonably likely to preserve the company’s infrastructure, obtain or use sanctions licences, operate appropriate accounts, pursue a sale or rescue, or realise assets for creditors.
3. Administration offered advantages over liquidation. Administrators had broader powers to manage the business, preserve staff, suppliers and licences, and pursue a sanctions-compliant sale or hive-down. A winding-up order risked a disorderly and terminal process, including loss of licence value and automatic termination of contracts.
4. The court exercised its discretion in favour of administration because independent, experienced insolvency practitioners could take control, ensure an orderly wind-down or rescue, comply with sanctions, and prevent distributions to shareholders. Authority was also given for use of the Insolvency Services Account.
5. Following Re Sberbank CIB (UK) Ltd, the order was directed to be sealed immediately. The court distinguished Re VTB Capital plc because that case involved a US licensing issue and a correspondent bank account, whereas this case involved an existing Basic Needs Licence and required immediate control by the administrators.