QFCH appointment and statutory purposes

The qualifying floating charge holder argued that the provision of consents to act as administrators received from insolvency practitioners coupled with an event of default under the facility agreement was sufficient to justify the appointment of administrators under the lender’s debenture, so the court need not determine whether an administration will achieve one of the statutory purposes.

Unsurprisingly the court rejected that argument and concluded that there must be a real prospect of achieving one or more of the statutory purposes for administrators to be validly appointed. The purposes of administration are:

  1. Rescuing the company as a going concern, or
  2. Achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration), or
  3. Realising property in order to make a distribution to one or more secured, or preferential, creditors.

The Company also sought to argue that the repayment terms under the lender’s facility agreement had been orally varied so that repayment was not due, despite the facility agreement expressly providing that any amendment of it had to be in writing and signed by the parties. As there was no written record of the alleged variation the court followed the decision in Rock Advertising [2018] UKSC 24 which concluded that the “law should and does give effect to a contractual provision requiring specified formalities to be observed for a variation”.

Strategic Advantage SPC v High Street Rooftop Holdings Limited [2020] EWHC 2572 (Ch)

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