Inquorate appointment of administrators

The Court of Appeal has given a recent judgment (Randhawa and Turpin [2017] EWCA Civ 1201 dated 01 August 2017) upon the inquorate appointment of administrators by a sole director. That case is here.

The question:  

The question that the Court of Appeal had to decide was this:

‘… whether the sole director of a company, whose articles required two directors for its board meeting to be quorate, could validly appoint administrators under paragraph 22 of Schedule B1 to the Insolvency Act 1986.

Sir Geoffrey Vos, Chancellor of the High Court gave the lead judgment.

The answer:

At paragraph 79:

‘… I conclude that the judge was wrong to have held that the sole director of the Company had the right to appoint the Joint Administrators under paragraph 22(2) of Schedule B1 notwithstanding the provision in the Articles requiring a quorum of 2 directors at board meetings of the Company.’

The warning:

At paragraph 97:

… the administrators could themselves have been expected to check that their appointment was valid as long ago as September 2013, when it was made. They had the Articles and a copy of the resolution appointing them. That resolution contained a clear inaccuracy, when it said that [the director of the Company] constituted a quorum for the directors’ meeting. A brief inspection of the Articles would have uncovered that inaccuracy.

… the Joint Administrators ought to have … [investigated any impediment to their appointment] immediately they were appointed if not before they accepted their appointment.

[one of the Joint Administrators] failed to investigate the matter to ensure that the appointment of his firm would be valid.

The conclusion:

At paragraph 101:

… I would hold that the appointment of the Joint Administrators was invalid.

The lesson:

Check that the director(s) have a quorum to appoint pre-appointment. Check again post appointment.

I am an insolvency solicitor. If you have any questions please give me a call on +(0) 1992 558 411 or drop me an email on: Richard.Cole@breezeandwyles.co.uk.

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