Administrators will always be keen to satisfy themselves that their appointment is valid. Typically, cases addressing validity have focused on whether the decision to appoint administrators has been properly made, or whether the security under which they are appointed has become enforceable.
This case is different – as we reported last year, the court struck out claims based on an alleged invalid of appointment of administrators in a “loan to own” situation. An entity unsuccessfully bid to acquire a controlling interest, took an assignment of a secured debt and then enforced that security (it was alleged) solely so it could buy the business and assets out of administration. Within two months of the appointment, the shareholders raised funds to clear the debt and the administrators left office. Four years later (and after the appointor had ceased to exist), proceedings were issued against the former office holders alleging, amongst other matters, that the improper motive of the appointor meant the entire appointment was invalid, exposing office holders to claims in trespass, and for the return of the remuneration and expenses drawn.
The Court of Appeal has partially reversed that decision holding that a subjectively improper purpose could invalidate an appointment. It has therefore ordered a trial to determine whether that was the case here. The Court of Appeal did not accept this would lead to a run of cases where appointments in a loan to own scenario would be challenged, highlighting that the facts in this case are unusual - the company was arguably solvent and if the claimant could demonstrate there was no genuine purpose to protect the appointor's interests as lender or security holder that was far removed from the normal loan to own scenario.
Nevertheless, potential administrators should be aware of this risk, particularly where the circumstances surrounding the appointment could be contentious, or the motives of the appointor questionable.
Glint Pay Ltd & Ors v Baker & Anor [2026] EWCA Civ 1023
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