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Appointing Administrators – clarity given for the Notice of Administrators Appointment following the confusion of NJM Clothing

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Insolvency practitioners will be relieved to see that the confusion caused by the controversial decision in Re NJM Clothing Ltd [2018] EWHC 2388 (Ch) has now been addressed in the more recent case of Re The Towcester Racecourse Company Ltd (in administration) [2018] 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:

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:

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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