The court’s powers to remove administrators (Re VE Interactive Ltd)

The court’s powers to remove administrators (Re VE Interactive Ltd)

Kavan Gunaratna, barrister at Enterprise Chambers, examines the details of Re VE Interactive Ltd, a case which involved a pre-packaged sale of the company’s business and which illustrates the court’s powers to remove administrators.

Re Ve Interactive Ltd (in administration); Ve Vegas Investors IV LLC and others v Shinners and others [2018] EWHC 186 (Ch), [2018] All ER (D) 34 (Mar)

What are the practical implications of this case, both for pre-pack sales in the future and the issue of insolvency practitioners (IPs) and conflicts of interest?

Ultimately the bankruptcy registrar (now an Insolvency and Company Court judge) was faced with a fairly limited question of whether the administrators should remain in place for a period of five business days, after they volunteered to resign with effect from a date shortly following trial.

Having said that, the background to the case involved a pre-packaged sale of the company’s business in highly distressed circumstances. The case is likely to add to a perception that IPs would face a real risk of having to vacate office where they had worked, to achieve an urgent sale of the business alongside directors whose conduct might subsequently come under fire.

In practice, one of the implications of the case may therefore be an increased reluctance on the part of well-established IPs to assist with a pre-packaged sale in those sorts of highly distressed scenarios, at least where the IPs do not have a guarantee of unimpeachable conduct by the company’s directors in progressing such a sale.

What was the background?

VE Interactive supplied software and other services to online retailers. It was set up in 2009 but never reported a profit and, instead, made heavy losses totalling £25m by 2015, including £13m of losses in that year. The company had persuaded many high-net worth individuals to invest millions in its share capital, but was balance sheet insolvent to the tune of at least £9m by late 2016.

By April 2017, the company had paid its staff late several times over, was threatened with the loss of business-critical services from core suppliers such as Microsoft and Google and was subject to a second winding-up petition presented by HMRC. A new board of dire

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About the author:

Stephen qualified as a solicitor in 2005 and joined the Restructuring and Insolvency team at Lexis®PSL in September 2014 from Shoosmiths LLP, where he was a senior associate in the restructuring and insolvency team.

Primarily focused on contentious and advisory corporate and personal insolvency work, Stephen’s experience includes acting for office-holders on a wide range of issues, including appointments, investigations and the recovery and realisation of assets (including antecedent transaction claims), and for creditors in respect of the impact on them of the insolvency of debtors and counterparties.