Challenges to an insolvency office-holder

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In exercising their role, functions, duties and powers, insolvency office-holders are under a duty to take reasonable care in their management of the estate's affairs, not to make a secret profit and not to act when they have a conflict of interest.

An office-holder must act in the best interests of creditors as a whole, subject to some limited exceptions, and as such must exercise a high standard of care and skill. They must always act impartially and independently.

For further reading on the roles, powers and duties of insolvency office-holders, see: Roles, powers, duties and functions of an insolvency office-holder—overview.

Challenging office-holders

Administrators

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 are acting, have acted or propose to act so as to unfairly harm the interests of a member or creditor of the company.

A creditor or a member of a company in administration

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Liquidators’ assignment of claims against former directors not perverse (Lanigan and Lenehan v Hyslop and others)

Restructuring & Insolvency analysis: Two former directors of the company in liquidation (the Company) applied under section 168(5) of the Insolvency Act 1986 (IA 1986) to set aside an assignment of claims against them to the second respondent. The application was made on the grounds that the liquidators’ decision to assign and the process by which they had reached their decision were perverse. The court held that the applicants did not have standing to apply: even if they were creditors of the Company, they had a collateral interest that transcended the interests of the creditors as a class for whom they purported to act. Further, even if they had had standing, the liquidators’ decision was not perverse. Written by Bridget Williamson, barrister at Enterprise Chambers.

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