The recent Court of Appeal decision in JCAM Commercial Real Estate Property XV Limited and Davis Haulage Limited on 11 April 2017 has clarified a number of matters with regard to the filing of notices of intention to appoint administrators in certain circumstances.
Background
The company had filed four notices of intention to appoint administrators (NOITA). The last one of these coincided with the period between the calling and holding of a meeting to approve a corporate voluntary arrangement.
The Company’s landlord, who was applying for possession of its premises occupied by the company, made an application to remove the fourth NOITA from the court record as an abuse of process so that it could proceed with the possession proceedings.
Intention
The court found that, although filing consecutive NOITAs was not in breach of the rules, in this particular case the fourth NOITA had been filed to protect the company while a voluntary arrangement was proposed to its creditors. The company was not entitled to a protection of a moratorium under the provisions relating to voluntary arrangement as it did not fit the relevant definition of a “small company”.
The Court found that in order to file a NOITA the directors or the company must have a settled intention to appoint an administrator, and that the only purpose of filing a NOITA is to give notice of the intention to appoint an administrator to a holder of a qualifying floating charge, so that that charge holder has the option to appoint their own administrator.
It is important therefore that the directors’ resolution and any notes made by the Insolvency Practitioner make it clear that there is a settled intention to appoint an administrator.
Can you file a NOITA when there is no qualifying floating charge holder?
In deciding this case the Court of Appeal went on to confirm that where there was no party that was entitled to appoint an administrator or an administrative receiver (no holder of a qualifying floating charge) then there would be no reason to file a NOITA and it would be inappropriate to do so.
This judgement makes it clear that the practice of filing a NOITA where there is no qualifying floating charge holder or someone who can appoint an administrative receiver (or any other person falling within the definition of those who should be given notice) would be wrong and may well be treated as an abuse of process.
The filing of a NOITA, thus creating a moratorium, often allows the proposed administrator to carry out investigation work to decide the best way to deal with the case or initial marketing to prepare for an administration. This option now appears to have been removed, which may mean that there are more in court administration applications which do provide a moratorium and do not require the existence of a qualifying floating charge.
It will be interesting to see how this develops.
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