In re Mannarest Ltd, HHJ Paul Matthews considered an unusual application by joint liquidators seeking to place the company into administration after the company had already entered creditors’ voluntary liquidation.
Background
Mannarest Ltd operated a care home which became financially unviable following regulatory difficulties. The company ceased trading in March 2023 and entered liquidation shortly after. Although unsecured creditor claims totalled nearly £486,000, the company held only £2,398 in cash; its principal asset was the care home property, recently enhanced by planning permission for residential redevelopment.
The sole shareholder/director, Mr Gabbitass, and a fellow director, Mr Priday (also a creditor through his company), devised a rescue plan: raise £500,000 to pay all creditors in full (except Priday’s own company, which agreed to defer repayment) and allow the company to exit liquidation, enter administration, and then exploit the property’s redevelopment value.
The application
The liquidators sought:
- An administration order.
- Their removal and release as liquidators.
- Permission for the administrators to distribute funds to unsecured, non preferential creditors.
The proposal relied on undertakings ensuring no creditor would be disadvantaged and that sufficient funds were available to meet all debts and administration costs.
Decision
The court granted the order. HHJ Matthews held that:
- The company was cash flow insolvent, meeting the statutory threshold.
- Administration was reasonably likely to achieve the statutory purpose: either rescuing the company as a going concern or ensuring a quicker, more certain return for creditors.
- Permission for distributions was appropriate, as the plan benefited creditors, aligned with the objectives of administration, and no better alternative existed.
The decision shows that administration can be used flexibly, even post liquidation, where it delivers a better outcome for creditors. The courts will support innovative restructuring solutions when backed by credible funding, clear undertakings, and no prejudice to creditors. In this case the directors’ cooperation, absence of misconduct, and a realistic commercial plan were critical to obtaining court approval.
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