Administration discharge in context of a CVA

This case concerned a niche, but nonetheless interesting legal point around conditional orders for administration discharge. Mills & Reeve acted for the administrators and this author conducted the advocacy at the hearing.

The company in administration was Guernsey registered and had entered administration pursuant to a court order. The administrators had subsequently proposed and the creditors had approved a CVA to run in parallel with the administration which, if successful, would result in a solvent exit for the company. The administrators were also acting as supervisors of the CVA.

Where - as here - the company has entered administration pursuant to a court order and the administrators are proposing a solvent exit via a CVA the administration can only be brought to an end via a court order. In any event there is authority to the effect that, where the administration has started by court order, a court application is still required in order to fix the time of discharge of the administrators.

Thus were the CVA to successfully complete it would need to be terminated pursuant to a court order and the court would also need to fix the time for the administrators’ discharge as administrators.

This would put the administrators to the cost and expense of having to make a further application for such termination and discharge. The administrators therefore sought to tie the discharge and administration termination in with the administration extension application seeking an order in advance for such termination and discharge conditional on successful completion of the CVA.

The administrators relied on the authority of In re Lehman [2022] EWHC 2995 (Ch) where it was held that a jurisdiction to order conditional discharge in advance for administrators existed but where the court declined to use the power in the circumstances.

The administrators sought to distinguish Lehman on the basis inter alia that it was a more complicated case and on the basis that here there was a CVA running in parallel meant that there was less for the administrators to do qua administrators.

The judge held, following Lehman, that there was jurisdiction to make the order sought but declined to exercise their jurisdiction in the circumstances holding that:

  • While the CVA is expected to lead to a distribution within six months of approval, the administrators anticipated at least the possibility that there might be a delay in achieving this if any creditor challenges the adjudication of their debt, and the evidence indicated that such challenges appeared to have a real prospect of being made in the case.
  • Although the judge noted that it was not necessarily likely to happen, any such dispute over adjudication would potentially bear upon the question of whether or not the CVA can complete successfully and it was possible that a creditor in dispute with the supervisors might attempt to use it as a bargaining chip.

The court therefore refused to make the order sought.

In re Central Properties Holdings Limited, Decision of Deputy ICC Judge Curl KC, 14 April 2023

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