Challenges to administrators—action for unfair harm
Challenges to administrators—action for unfair harm

The following Restructuring & Insolvency practice note provides comprehensive and up to date legal information covering:

  • Challenges to administrators—action for unfair harm
  • Challenge under paras 74 and 88 of Schedule B1 to the Insolvency Act 1986
  • Orders the court may make
  • Statutory exceptions preventing an order being made
  • What is considered 'unfair harm'
  • Cases brought under IA 1986, Sch B1, para 74

As a basic rule administrators enjoy a great deal of protection. Their agency status means they rarely incur personal liability, and the company over which they are appointed is protected by the moratorium that comes with the administration.

However, the administrator is not immune from challenge by creditors.

An administrator has wide powers and discretion in the conduct of an administration and, as a result, the courts are generally reluctant to interfere with the conduct of the administration, unless absolutely necessary. However, there are occasions when an administrator's conduct may need to be challenged if they have acted improperly and a creditor is harmed as a result.

Challenge under paras 74 and 88 of Schedule B1 to the Insolvency Act 1986

There are two main provisions which allow a challenge to the administrator's conduct. The first, paragraph 88 of Schedule B1 to the Insolvency Act 1986 (IA 1986), gives the court the power to remove an administrator. See Clydesdale Financial Services v Smailes.

The other provision—and the provision with which this Practice Note is concerned—is where a creditor or a member of a company in administration may apply to the court under IA 1986, Sch B1, para 74 claiming that:

  1. the administrator is acting or has acted so as unfairly to harm the interests of the applicant (whether alone or in common with some or all other members or creditors)

  2. the

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