Q&As

Can an administrator making a distribution to creditors pay a creditor (A) which is a sister company to (B), where B holds an account that the administrator has been notified is the subject of a freezing injunction? The freezing injunction prohibits the respondent from removing, disposing of, dealing with or diminishing the value of their assets, and the prohibition specifies, in particular, any interest the respondent has in the account held with (B).

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Published on LexisPSL on 27/11/2020

The following Restructuring & Insolvency Q&A provides comprehensive and up to date legal information covering:

  • Can an administrator making a distribution to creditors pay a creditor (A) which is a sister company to (B), where B holds an account that the administrator has been notified is the subject of a freezing injunction? The freezing injunction prohibits the respondent from removing, disposing of, dealing with or diminishing the value of their assets, and the prohibition specifies, in particular, any interest the respondent has in the account held with (B).

Can an administrator making a distribution to creditors pay a creditor (A) which is a sister company to (B), where B holds an account that the administrator has been notified is the subject of a freezing injunction? The freezing injunction prohibits the respondent from removing, disposing of, dealing with or diminishing the value of their assets, and the prohibition specifies, in particular, any interest the respondent has in the account held with (B).

We have assumed that:

  1. the administrator has been appointed over company B

  2. an associated company of B, company A, is a creditor of B and the administrator intends to make a distribution to creditors, including creditor A

An administrator acts as agent of the company over which they were appointed. Administrators have the power to make distributions to creditors, including unsecured creditors, with the court's permission (see paragraph 65(3)(b) of Schedule B1 to the Insolvency Act 1986 (IA 1986)). For further information, see Practice Note: Role, powers, functions and duties of an administrator. It is not clear from the information provided whether company A is a secured or unsecured creditor of B. If A is a secured creditor of B, it is not clear whether A has security over the bank account subject to the freezing order. As a freezing order is a remedy which operates personally against the defendant (in this

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