The Corporate Recovery team advised Insetco Plc who presented a winding-up petition against Integeral for non-payment of a costs order. On the first return date of the Petition, Integeral sought and obtained an adjournment for the stated purpose of paying the debt. No payment proposals were forthcoming following that hearing and instead, on the last business day before the Petition was due to come back before the Court, the sole director of Integeral made an application for an administration order for the alleged purpose of achieving a better return for creditors by bringing a £15 million legal claim against a client for non-payment of commission. In his evidence supporting the application, the director failed to disclose that (1) a guarantee and floating charge over all of Integeral’s assets had been granted to one of his business colleagues, (2) he had also caused Integeral to agree to pay and charge the net proceeds of the intended litigation to himself and four others, and (3) two days before the application was issued he and a former director had incorporated a phoenix company. The application was supported by evidence from intended nominee Insolvency Practitioners who had unquestionably accepted what they had been told by the director and had not undertaken any investigation, despite matters being drawn to their attention by Insetco in the evidence in answer to the application.

The case is of importance because the Court gave guidance on:

    the obligations of an applicant for an administration order to give an accurate and full account of the Company’s circumstances.
    the obligations of the nominee administrator to form an independent and competent view on the evidence and prospects of the purpose of administration being achieved.
    the circumstances in which it would be appropriate to make an order for indemnity costs against a director where an administration application fails.
    the circumstances in which it be would be appropriate to grant permission to make an application for a third party costs order against nominees.

The Court also outlined a number of factors, including the existence of potential claims against directors and the need for the appointment of an independent office-holder, which would be relevant to the court’s discretion when deciding whether to make an administration order rather than a winding-up order.

A copy of the judgment can be found at Re Integeral Limited [2012] All ER (D) 63 (Feb).

The case was led by Prav Reddy and Nick Hurley with assistance from Jessica Lorimer, Lucy Walker and Samuel Milne.

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