Court orders liquidation of a company rather than dissolution following the conclusion of administration

The joint administrators of two group companies, ACL22 and ACL06, applied for orders discharging them from their liability as administrators. After making final distributions, notices were sent to end the companies’ administrations and for the companies to be dissolved, and the administrators applied to be discharged. 

A bondholder objected to the application in respect of ACL22, arguing that company should be put into liquidation rather than dissolved so that investigations could be carried out against the company’s former directors for wrongful trading, misfeasance and/or breach of duty. Other bondholders had filed witness statements echoing the position of the respondent bondholder.

The court accepted that it was likely a liquidator would take the same view as the administrators regarding the prospects of pursuing claims against ACL22’s former directors, and was unlikely to consider it was appropriate to spend funds in the liquidation on pursuing such claims. Therefore, a liquidator was likely to make the same final distribution as an administrator. The court also noted, however, that a liquidation would allow the respondent bondholder and any others that joined forces an opportunity to investigate the viability of claims, and no other creditors would lose out to a material extent by the company going into liquidation. By contrast, a dissolution would extinguish the opportunity to raise funds, investigate and/or pursue claims against the former directors.
 
Both applications for discharge were granted, but the court ordered that ACL22 should go into liquidation rather than be dissolved on the basis it would be unsatisfactory to shut out the bondholder and any fellow bondholders from pursuing the proposed claims.

Mittal v Berthier [2024] EWHC 3122 (Ch)

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