Mannarest Ltd, Re

An administration order may be made on an application by a liquidator where the company is, or is likely to become, unable to pay its debts and the order is reasonably likely to achieve an objective of administration. A real prospect of achieving one statutory objective is sufficient; applicants need not identify in advance which objective will be achieved. The court retains a wide discretion and may consider all relevant circumstances. Permission to distribute to unsecured, non-preferential creditors under Sch B1 para 65(3) is likewise broad. The court should assess the proposed distribution when permission is sought, consider its effect on the administration’s objectives and creditors as a whole, make proper provision for secured and preferential creditors, examine realistic alternatives, and consider the distribution’s terms and effect on exit from the administration.

The joint liquidators of Mannarest Ltd applied without opposition for an administration order under Sch B1 para 38 of the Insolvency Act 1986, their removal and release as liquidators, and permission for the administrators to distribute funds to unsecured creditors.

The company had ceased trading and entered creditors’ voluntary liquidation after difficulties affecting its residential care-home business. It had substantial unsecured liabilities and a property enhanced by planning permission for residential conversion. Funding of £500,000 was available to pay the company’s liabilities, except for a postponed related-party debt, provided that the company entered administration. The central issues were whether the statutory conditions for administration were satisfied and whether permission should be given for the proposed distributions.

1. Administration order. The liquidators were entitled to apply under Sch B1 para 38(1) of the Insolvency Act 1986. The company was cash-flow insolvent within s 123(1)(e), applying the meaning imported by para 111(1). The civil standard of proof applied. The relevant cash-flow assessment includes debts falling due in the reasonably near future, with the appropriate period depending on all the circumstances and the company’s business. (See [8]–[11], [17].)
2. The court was satisfied that the administration order was reasonably likely to achieve the purpose of administration under para 11. There was a real prospect that the company could be rescued as a going concern, and, alternatively, that administration would produce a quicker, more certain and less costly outcome for creditors. It was unnecessary to identify in advance which of the three statutory objectives in para 3(1) would be achieved. Hammonds v Pro-Fit USA Ltd [2007] EWHC 1998 (Ch) was applied. (See [12], [17]–[19].)
3. The discretion whether to make an administration order is wide and must be exercised judicially, having regard to the interests of relevant parties and the purposes of the legislation. The range of potentially relevant factors is not closed. Roundtree Ventures Ltd v Oak Property Partners Ltd [2018] BCC 135 was followed. (See [13], [19].)
4. Distribution permission. Permission under Sch B1 para 65(3) was required before distributions could be made to creditors who were neither secured nor preferential. The criteria identified in Re MG Rover Belux SA/NV [2007] BCC 446, adopting the guidance in Re GHE Realisations Ltd [2005] EWHC 2400 (Ch), [2006] BCC 139 and [2006] 1 WLR 287, were applicable. The court considered the position when permission was sought, the distribution’s conformity with the administration objectives, the interests of creditors as a whole, provision for secured and preferential creditors, realistic alternatives, the distribution’s terms, and its effect on the proposed exit route.
5. Those criteria were met. There were no secured creditors, preferential creditors were provided for, continued liquidation posed a risk that creditors would not be paid in full, and the proposed distribution was conducive to administration because payment could not occur without permission. The court therefore made the administration order, appointed the applicants as joint administrators with the requested powers, directed payment of winding-up expenses, removed the liquidators and provided for their release when determined by the Secretary of State. (See [14]–[16], [20]–[21].)

First-instance decision. The judgment records the court’s reasons for an order announced after the hearing on 17 January 2025.