The High Court recently provided great news to Company Directors who need protection from hostile creditors. Directors of all limited companies may now take advantage of the moratorium available when filing a Notice of Intention to Appoint an Administrator, which will provide immediate protection from any creditor or other person taking action against a company or its assets (e.g. bailiffs, landlord distraint and winding up petitions). This moratorium is available even where there is no Qualifying Floating Chargeholder. But this also means that Notice of an Intention to Appoint an Administrator MUST be given in all circumstances, which could delay the urgent appointment of Administrators whilst a ‘reasonable notice’ period is given. The Court also found that an out of court appointment of administrators was invalid on two counts: there was no valid board resolution; and there was no notice to the company/shareholders. It is imperative that a Board Meeting is validly convened and constituted. Disagreeing or hostile directors can no longer hold disregard for the Articles of Association of a company and force the appointment of an Administrator. This should never have been able to happen before this ruling, however nobody had previously challenged the validity of the appointment of an Administrator on these grounds. It demonstrates the importance of making sure your advisers deal with your situation thoroughly. So for disagreeing boards of directors this ruling could thwart the appointment of an Administrator by a minority number of hostile directors entirely. There are other ways to place a company into Administration and perhaps these routes need to be considered. We have utilised all possible routes to place companies, LLP’s and partnerships into Administration where there are disagreeing stakeholders. Contact us for further help and guidance.
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