VTB Capital Plc, Re

When an administration has entered distribution mode, the court may extend the administrator’s term for as long as reasonably necessary to complete the distribution, provided the statutory purpose remains reasonably achievable and continuation serves creditors as a whole. The court should consider all the circumstances, including prejudice to creditors, creditor views, the comparative costs and delay of liquidation, and the complexity and likely duration of the distribution process. A substantial extension may be appropriate where piecemeal extensions would increase cost and uncertainty. The court may also regularise an administrator’s procedural error where the alternative procedure was more favourable to creditors and caused no prejudice.

VTB Capital Plc was in administration following the impact of UK sanctions and the closure of its correspondent bank account. Its administrators sought a five-year extension of the administration to 5 December 2029. They also sought an order regularising their use of the reporting requirements in the Insolvency Rules 2016 rather than the applicable 2004 Credit Institutions Reorganisation and Winding Up Regulations.

The proposed scheme of arrangement and an application for permission to distribute were adjourned. The issues determined were whether the administration should be extended and whether the past and future reporting arrangements should be regularised.

1. The application to extend the administration to 5 December 2029 was granted. The application to regularise the administrators’ reporting arrangements was also granted.
2. The court’s discretion under paragraph 76(2)(a) of Schedule B1 to the Insolvency Act 1986 should be exercised in the interests of creditors as a whole and with regard to all the circumstances. Relevant considerations include whether the purpose of the administration remains reasonably likely to be achieved, prejudice caused by the extension, and creditors’ views.
3. The administration was effectively in distribution mode. The administrators were promoting a scheme and, if it failed, were considering alternative distribution strategies. In those circumstances, distribution through administration or the scheme was likely to produce a better result than liquidation.
4. Liquidation could be disadvantageous because it might increase costs or delay distribution and, given the possibility of a surplus, could reduce statutory interest payable to creditors. The complexity of the administration, the sanctions regimes, the time required to realise assets, and the administrators’ concrete distribution strategy justified a five-year extension. Further short extensions would increase cost and uncertainty.
5. The administrators had incorrectly followed the reporting regime in the Insolvency Rules 2016 rather than the 2004 Credit Institutions Reorganisation and Winding Up Regulations. The error had caused no prejudice and had provided creditors with more frequent and efficient reports. An order under regulation 16(3) of the 2004 Regulations was therefore made to regularise past and future reporting by reference to the 2016 Rules.