Abigal Boura v Lyhfl Limited

An application to court for an administration order by “the directors” requires authorisation by all or a majority of the board acting through a validly convened board meeting. A sole director may stand differently from one of two directors where the company’s internal governance prevents a valid board resolution. The court cannot appoint an administrator of its own motion, and the statutory power to cure formal defects or irregularities after the event does not permit it to dispense in advance with the standing requirements for an application.

Abigal Boura, one of two directors and shareholders of LYHFL Limited, applied for the appointment of an administrator under paragraph 12(1)(b) of Schedule B1 to the Insolvency Act 1986. The other director opposed the application, arguing that one of two directors lacked standing without majority board approval and a valid board resolution.

The court heard the standing issue first because it would dispose of the application. The central question was whether “the directors” included one director acting alone in a two-director deadlock.

1. Application dismissed. One of two directors had no power to apply to court for an administration order under paragraph 12(1)(b) of Schedule B1 without approval by a majority of the directors and a valid board resolution. The application was dismissed with costs summarily assessed at £45,000 including VAT.
2. Paragraph 12(1), read with paragraph 105, requires an application by “the directors” to be authorised by all or a majority of the board. The relevant decision must be taken at a properly convened board meeting. Paragraph 105 gives an act of a majority the same validity as an act of all the directors; it does not dispense with the ordinary rules of internal management.
3. The reasoning in Re Equiticorp International plc, Minmar (929) Ltd v Khalastchi and Re BW Estates Ltd (No 2) supported that construction. Although those decisions concerned appointments out of court or predecessor provisions, they confirmed the need for majority board authority and compliance with the company’s internal governance.
4. Re Brickvest Ltd was distinguished if possible and otherwise departed from. Its treatment of the standing issue as discretionary, and its reliance on rule 12.64 of the Insolvency Rules 2016 to cure the defect, could not be reconciled with the statutory scheme. Rule 12.64 operates to cure irregularities after the event; it does not authorise the court to dispense in advance with jurisdictional requirements.
5. Re Nationwide Accident Repair Services Ltd was confined to the case of a sole director. The reference there to the singular form of “the directors” was not applicable to a two-director board, because paragraph 105 governed the present question.