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Readers will be aware of the conflicting authorities on the
effect of directors omitting to give notice of their intention to
appoint administrators to the company or any of the other persons
listed at rule 2.20 of the Insolvency Rules 1986.
In Hill v Stokes (2010) and Virtual Purple
Professional Services Ltd (2011), it was held that an
appointment of administrators was not rendered invalid when
directors failed to give notice of their intention to appoint to
the company or to landlords who were distraining. However, in
Minmar (2011) and Msaada Group (2011), the courts
decided that failure to give notice to the company or the
supervisor of a voluntary arrangement meant that the subsequent
appointment of administrators was invalid.
The case of BXL Services brings some welcome clarity to
these recent conflicting decisions. Mr Justice Purle QC decided
that failure by directors to give notice of an intended appointment
of administrators to the company did not invalidate the
appointment. He followed the approach of the court in Re Ceart
Risk Services (2012), where both Virtual Purple and
Msaada were fully considered and the approach of
Virtual Purple preferred.
While this area of the law is now settled at first instance, the
Court of Appeal could reverse the ruling in BXL Services
if a subsequent case is argued before it. Directors should
therefore if at all possible, continue to serve the company and the
other prescribed persons with notice of their intention to appoint
administrators.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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