KRF Services (UK) Ltd & Ors, Re

A company may apply for an administration order through a sole director where the Model Articles apply unmodified and no article requires more than one director. Article 7(2) disapplies the directors’ decision-making provisions, including the quorum provisions, in that situation.

The making of an administration order does not, in principle, breach the Russia sanctions regime. The right of access to the court cannot be curtailed by subordinate legislation without clear authority in primary legislation. Appointment of administrators is not itself dealing with funds, making funds available, or circumventing sanctions. The court must nevertheless consider licensing and may postpone the order or impose safeguards where appropriate.

The Company provided management and property-related services for the Kantor family. Following the designation of Dr Kantor under the Russia (Sanctions) (EU Exit) Regulations 2019, the Company’s funding, banking and business activities were substantially disrupted. It was unable to pay debts exceeding £7.7 million.

The Company and its sole director applied for an administration order. Keltbray Ltd, a major creditor, sought permission to appear and, if necessary, to be joined as an applicant. The issues included the validity of the sole director’s resolution, insolvency, the statutory purpose of administration, and the effect of sanctions on the proposed appointment.

1. Joinder and representation. Keltbray was permitted to appear and be represented under rule 3.12(1)(j) of the Insolvency (England and Wales) Rules 2016. It was joined as a third applicant and the order was made on the joint application of all three applicants.
2. Validity of the application. Under Article 7(2) of the Model Articles, where the company only has one director and no article requires more than one director, the general rules concerning directors’ decision-making do not apply. Article 11, including its quorum and limited-powers provisions, was therefore disapplied. The fact that the Company had previously had more than one director was irrelevant. The resolution authorising the application was valid and effective.
3. Insolvency and purpose. The Company was unable to pay its debts as they fell due, satisfying paragraph 11(a) of Schedule B1 to the Insolvency Act 1986. It was reasonably likely that administration would achieve a better result for creditors than liquidation, principally through licensed recovery of connected-party receivables, satisfying paragraph 11(b).
4. Sanctions. Applying PJSC Bank v Mints, the right of access to the court includes the right to have an application adjudicated and effective relief granted. Any restriction would require clear and unambiguous wording in the Sanctions and Anti-Money Laundering Act 2018. That Act did not necessarily imply a prohibition on administration orders, and the subordinate regulations could not be interpreted to produce that result.
5. The appointment itself did not naturally amount to dealing with funds, making funds or economic resources available, or circumventing the prohibitions. Those prohibitions could apply to steps later taken by administrators, which might require licences. The court should consider whether to defer the order where licences were absent, but could make an immediate order where delay threatened creditors and safeguards were provided.
6. The Joint Administrators undertook to pursue the licence application, avoid dealing with the Company’s funds or economic resources until licensing, and return to court by 5 March 2025 if no licence had been granted. The administration order was accordingly made immediately, with ancillary powers subject to necessary licences.

First-instance decision. No prior appellate decision is stated in the judgment.