Court wind up company without petition

Published on
2 min read

Administrators who were appointed by the company’s directors found their administration proposals voted down by the creditors. The majority creditor then applied for directions to convene a creditors’ meeting in order to replace the administrators. The administration process was evidently complicated due to the disputes between a number of warring factions such as the largest minority shareholder (who was bringing a derivative claim against entities connected with the majority shareholder); the majority creditor; and indeed the administrators themselves.

Although the court have an express and unfettered power to authorise the implementation of an administrators’ proposals, regardless of opposition by the majority creditor, they chose not to do so.

Therefore, apparently unable to reconcile the factions’ competing interests, and without suggestions as to how the company may be rescued as a going concern, the court exercised their wide but rarely used discretion under Insolvency Act 1986 Sch.B1 Pt 007 para.55(2), which provides for "any other order...[it] thinks appropriate", to make an order winding up the company without the existence of a petition.  However, the court also allowed a 14-day adjournment to allow non-party creditors to consider their options.

The court, having been required to decide on a number of discrete issues too numerous for this article to analyse, starkly demonstrated how they have inherent jurisdiction and unfettered discretion to control, supervise, and direct every aspect of the administration process; even to direct that things be done in apparent conflict with legislation. 

However, previous case law on the issue dictates that this wide court discretion should be exercised cautiously and only in exceptional circumstances.

IN THE MATTER OF FORTUNA FIX LTD (In Administration) sub nom (1) IAN COLIN WORMLEIGHTON (2) DAVID PHILIP SODEN (JOINT ADMINISTRATORS OF FORTUNA FIX LTD (In Administration)) v (1) SALAMANDER INVEST AS (2) GENESIS TECHNOLOGIES LTD (2020)  [2020] EWHC 2369 (Ch)

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