Creditor Concerns About Director Conduct is a post flowing from the case of Strategic Advantage SPC v ARL O09 Ltd & Ors [2020] EWHC 3350 (Ch) (“Strategic Advantage”).
This was an application by a creditor to appoint Administrators over a company.
In consideration of the exercise of discretion the following factors were taken into acccount and form a useful series of signposts as to matters that a Court might consider:
- The Creditor in Strategic Advantage was the largest creditor standing to benefit from recoveries.
- No prejudice arising from Administration to other major lending creditors.
- Insolvency Practitioners can often obtain funding for Administrations need to maximise realisations and afford stability.
- Concerns about Director conduct:
Those directors appear (in the words of Mr Campbell, one of the AIL Administrators) to have “shipped out” five subsidiaries of AIL (the Orphan Companies) to a company owned and controlled by the directors shortly before AIL entered administration. According to Mr Jee, AIL utilised over £7 million of the monies advanced by the Applicant to AIL to acquire and/or make loans to the Orphan Companies. The Orphan Companies were sold for only £1 each on terms that, unless the purchaser (i.e. the company owned and controlled by the directors) sold the Orphan Companies within 3 months, no further consideration would be payable and the debts of the Orphan Companies to AIL would be written off. Mr Campbell has indicated on behalf of the AIL Administrators that they will be investigating the conduct of the directors in this regard. The Applicant submits that, as individuals who are already under separate investigation by the AIL Administrators, the business and assets of the Companies should not be left in the directors’ hands.
6. Pre-existing good relations between the insolvency practitioners and creditors already established and the freeze on creditor enforcement action will provide a breathing space.
