Insolvency practitioners will be relieved to see that the confusion caused by the controversial decision in Re NJM Clothing Ltd  EWHC 2388 (Ch) has now been addressed in the more recent case of Re The Towcester Racecourse Company Ltd (in administration)  EWHC 2902 (Ch).
Rule 3.24 of the Insolvency (England and Wales) Rules 2016 (the “Rules”) requires that a Notice of Appointment of Administrators (the “Notice”) filed at Court by a company or its directors to appoint Administrators over the company must contain:
- a statement that the company or the directors (as the case may be) have appointed the person named as Administrator of the company; and
- the date and time of the appointment.
However, under Paragraphs 29 and 31 of Schedule B1 to the Insolvency Act 1986, such an appointment only takes effect when (and therefore at the precise time that) the Notice is filed at court.
This gives rise to a practical difficulty – the Notice must be completed and sworn, stating the precise date and time of the appointment, before the Notice is filed at court. However, the appointment only takes effect when the completed and sworn Notice is subsequently filed at court. The precise date and time of the filing (to the second) cannot therefore be known at the time that the document is completed and sworn.
Following the introduction of the Insolvency Rules on 6 April 2017, an industry practice developed to deal with this practical difficulty - the time and date of the appointment was usually stated in the Notice as being "the time and date endorsed by the court below" or wording to that effect.
However, the decision in NJM Clothing appeared to suggest that this practice would result in the Administrator’s appointment being defective and, as such, invalid (albeit, such defect could be remedied under Rule 12.64 of the Rules).
It is therefore with great relief that the more recent case of Towcester Racecourse has addressed this issue and brought some much-needed clarity for practitioners. In Towcester Racecourse the court distinguished the decision in NJM Clothing and held that:
- a Notice is not defective if it defines the date and time of appointment by reference to the point at which the notice is filed at court;
- the date and time of appointment did not need to precede the time that the Notice is filed at Court, it could be at the same time; and
- there was no need for the time of the appointment to be recorded to the second as suggested in NJM Clothing (stating that, if this was the case, "the clocks in courts up and down the country will have to be a great deal more accurate than they are at present"!).
The court also held that, where the company's articles require a specific director's prior written consent to an Administrator's appointment, the director could waive that requirement after the appointment.
This decision is extremely welcome and endorses the previous industry practice of cross-referencing the date and time of an Administrator’s appointment in the Notice to the date and time that the Notice is filed at Court.
If you should have any queries regarding the content of this update or need any assistance with appointing company Administrators, then please do not hesitate to contact us.
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