Is An Administrator Or Liquidator An Officer Of A Company?

Administrator Or Liquidator An Officer Overview

The question Is An Administrator Or Liquidator An Officer Of A Company? was looked into by the highest Court in the land in the case of Palmer, R (on the application of) v Northern Derbyshire Magistrates’ Court & Anor [2023] UKSC 38.

Up and down the country it might be envisaged Insolvency Practitioners are breathing a bit of a sigh of relief with the Supreme Court confirming that an Administrator is not an Officer of a Company and not for the purposes of Section 194(3) of the Trade Union and Labour Relations (Consolidation) Act 1992 (“TULRCA”). The same being said to apply to a Liquidator.

The point under consideration was one of statutory construction. 

The matter assumed significance because legislation routinely prescribes that Officers of companies have obligations which if they fail to comply with can mean they might in some instances face criminal proceedings for example only.

How Could An Administrator Be An Officer?

This case concerned the need to provide notice to the Secretary of State of proposed redundancies in certain instances where the employer is looking to dismiss 100 or more employees.

In this case, Robert Palmer was one of the Administrators of West Coast Capital (USC) Ltd and had to deal with proceedings in respect of the matter of notice given to the Secretary of State. Following a hearing of the legal issues a judgment sprouted on 29 May 2018 in which the issue the Supreme Court trained its sights on was a) whether or not an Administrator was an Officer of the company and b) for the purposes of Section 194(3).

Before the Supreme Court looked into the matter this was no litigation backwater. Not only had the Northern Derbyshire Magistrates’ Court had its say on the matter but following an application for judicial review, so to had the Divisional Court when it upheld the initial decision that the Supreme Court has now reversed.

The Divisional Court said if an Administrator was not an Officer there would be nothing to deter non-compliance with the criminal sanction applicable thus leaving a vacuum.

The Supreme Court’s View

The Supreme Court looked at certain historical cases on the matter and said:

In neither of these cases was there any consideration of the clear distinction drawn in the IA 1986 between administrators and liquidators on the one hand and officers of a company, on the other hand, and in my judgment, in holding that administrators and liquidators were officers of a company for the purposes of section 1157 of the Companies Act 2006 and its predecessor, they were wrongly decided.

…

If, as a general proposition, an administrator is not an officer of a company, as I consider to be correct, an administrator could nonetheless fall within section 194(3) of TULRCA if an extended meaning were given to “other similar officer” in that provision to include an administrator for the purposes of that sub-section.

Applying conventional principles of statutory construction, I see no scope for such an extended reading. There is no hint in the language of the section that an expansive interpretation should be given to it. On the contrary, the restriction to an officer who can be said to be “similar” to a director, manager or secretary militates against an expansive interpretation.

What Is The Constitutional Test For A Company Officer?

What the Supreme Court said was that to be an Officer of a company was a constitutional test:

What then is meant by an “officer” of the body corporate in the context of a provision such as section 194? In my judgment, the answer is tolerably clear. It is essentially a constitutional test. Does the person hold an office within the constitutional structure of the body corporate, as is the case with directors, managers and secretaries? That is the normal meaning of an officer of a company or other institution, and the normal meaning is emphasised by the prior reference to directors, managers and secretaries, all of whom are officers in the conventional sense, together for good measure with the words “other similar” before “officers”.

The matter of whether or not an Administrator or Liquidator is an Officer of a Company as a point of uncertainty seems arguably somewhat remarkable given the potential implications. It is since July 2015 that the matter in this case was first floated and now, it seems to have taken over 8 years to work through the Courts to a final resolution. It took almost three years (29 May 2018) for a reserved judgment in the Northern Derbyshire Magistrates’ Court to be issued.

The Supreme Court looked into the deployment of the term ‘Officer’ in the Insolvency Act 1986 which has now been around for a very long time and which it noted when originally enacted was used 120 times.

It is conspicuous the point is by no means an obvious one, otherwise the Supreme Court would not have overturned the position of two lower Courts.