Rajnesh Mittal & Anor v Edouard Berthier & Ors

Administrators may be discharged from liability under paragraph 98 of Schedule B1 to the Insolvency Act 1986 when the administration is being brought to an end. Where dissolution would extinguish a realistic opportunity for creditors to investigate and pursue potential claims, the court may instead direct that the company be wound up. The court must assess the interests of the company’s creditors as a whole. It may take account of the likely conduct and funding difficulties of a liquidator, but should not shut out creditors from investigating potentially viable claims where liquidation would not materially prejudice other creditors.

The applicants were joint administrators of ACL Astute 2022 Ltd and ACL Astute 2006 Ltd. They sought discharge under paragraph 98 of Schedule B1 to the Insolvency Act 1986 and intended to file notices under paragraph 84, resulting in dissolution after three months.

One bondholder opposed dissolution of ACL Astute 2022 Ltd. He contended that the company should instead be wound up so that further investigations could be undertaken into possible claims against former directors, including claims based on wrongful trading, misfeasance and breach of duty. The central issue was whether dissolution or liquidation best served the interests of creditors.

1. The applications for the administrators’ discharge were granted. The discharge was straightforward once the administrations were brought to an end in accordance with Schedule B1.

2. ACL Astute 2006 Ltd could proceed towards dissolution following the filing of notices under paragraph 84 of Schedule B1.

3. ACL Astute 2022 Ltd was instead ordered to be wound up, with associated directions. The court had to compare the respective interests involved, including the duty of an administrator or liquidator to act in the interests of the company’s creditors as a whole.

4. A liquidator might reach the same view as the administrators on the prospects of claims against former directors and might decide not to spend the remaining funds pursuing them. That did not remove the advantage of liquidation for the objecting bondholder and other bondholders, who would retain an opportunity to investigate and, if viable claims were identified, raise funding to pursue them.

5. Dissolution would extinguish that opportunity. Liquidation was unlikely materially to prejudice the creditors who were due to receive the final distribution. In those circumstances, it would be unsatisfactory to shut the bondholders out merely because the objection was raised late or the administrators considered dissolution preferable.