Q&As

The appointment of administrators by a qualifying floating charge holder (QFCH) suspends a pending winding up petition. If the appointing QFCH was granted their charge while the company was subject to a pending petition (and section 127 of the Insolvency Act 1986 (IA 1986) potentially applies), what would be the status of the administrators' appointment (i) while in office and (ii) once the administration ceased and the winding up petition was reinstated—assuming a winding up order (WO) was subsequently made on it? Would the appointment be valid prior to the winding up order being made (notwithstanding the risk of IA 1986, s 127 biting later); and would the subsequent application of IA 1986, s 127 on the WO render it invalid and a nullity (or would it still have been valid)?

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Produced in partnership with Caroline Clark
Published on LexisPSL on 21/09/2018

The following Restructuring & Insolvency Q&A produced in partnership with Caroline Clark provides comprehensive and up to date legal information covering:

  • The appointment of administrators by a qualifying floating charge holder (QFCH) suspends a pending winding up petition. If the appointing QFCH was granted their charge while the company was subject to a pending petition (and section 127 of the Insolvency Act 1986 (IA 1986) potentially applies), what would be the status of the administrators' appointment (i) while in office and (ii) once the administration ceased and the winding up petition was reinstated—assuming a winding up order (WO) was subsequently made on it? Would the appointment be valid prior to the winding up order being made (notwithstanding the risk of IA 1986, s 127 biting later); and would the subsequent application of IA 1986, s 127 on the WO render it invalid and a nullity (or would it still have been valid)?

Section 127(1) of the Insolvency Act 1986 (IA 1986) provides that in a compulsory liquidation, any disposition of the company's property after the commencement of the winding up (ie after the date that the winding up petition was presented) is void.

For more information, see Practice Note: Validation orders—dispositions of property after commencement of winding up.

IA 1986, s 127(1) could cause a problem if the charge granted after the date of the presentation of the petition was considered to be a disposition of the company's property. If the charge was a disposition of the company's property then it would be void and the appointment of any administrator by the so-called charge holder would similarly be void

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