- Impact of failure to give notice to a prior floating charge holder on an out of court administration appointment by a junior floating charge holder (NMUL Realisations Ltd)
- What are the practical implications of this case?
- What was the background?
- What did the court decide?
- Case details
Restructuring & Insolvency analysis: The court held that an out of court administration appointment was not void even though notice had not been given to a prior floating charge holder as required by paragraph 15(1) of Schedule B1 to the Insolvency Act 1986 (IA 1986). Rather, the fact that notice had not been given was an irregularity which, provided that no substantial injustice had been caused thereby, would not invalidate the insolvency proceedings (rule 12.64 of the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024). In NMUL, the reason for which notice was not given to the prior floating charge holder is that the relevant charge had been marked (incorrectly) as satisfied at Companies House as a result of an incorrect filing made by the company’s director. The administration in NMUL was a success, inasmuch as the company’s secured creditors (or those beneficially entitled to the security) had been paid in full, with scope for a dividend to unsecured creditors. Moreover, creditors and shareholders of NMUL had been invited to object to the administrators treating the prior floating charge holder as secured, but none did. No injustice had therefore been caused. Written by Stefan Ramel, barrister, Guildhall Chambers, Alex Mehdevy, partner, and Ian Gill, principal associate, both of Eversheds Sutherland. Stefan, Alex, and Ian were part of the legal team representing the applicant administrators.
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