Court confirms jurisdiction to make retrospective administration order

An administration can be extended by consent of each secured creditor and the unsecured creditors of the company.

The administrators of a company sought consent for extension using the deemed consent procedure, a procedure whereby consent is implied from the failure of a requisite number of creditors to raise objection. In doing so, they overlooked the fact that, while the deemed consent procedure was available for the unsecured creditors, it was not available for the secured creditors.

When this issue became apparent to the administrators the administration had already expired. Accordingly, the administrators applied to the court seeking an administration order with retrospective effect.

The judge stated that it might be arguable that the secured creditors had anyway given their consent by their conduct in continuing to fund the administration after the administrators had requested their consent to an extension but this was an academic point as it had not been argued by the administrators.

The judge referred to the line of authority enabling the court to make an administration order retrospectively but in which doubts has been expressed as to the jurisdiction. He stated that the time had come when it had to be regarded as settled at first instance that:

  • The jurisdiction exists.
  • Extreme caution is required before its exercise.
  • Frequently the jurisdiction will be withheld.

The judge went on to consider whether the jurisdiction should be exercised in the instant case. He stated, in effect, that one had to look at whether there was prejudice to some creditors from a retrospective order.

In the instant case, there did not appear to be any such prejudiced creditors, the only parties with a real economic interest in the administration being the secured creditors who supported the application. Accordingly the judge made the administration order with retrospective effect.

Baker v Biomethane (Castle Easton) Limited [2019] EWHC 3298 (Ch)

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