Key Point

The Court has given guidance on when a company in administration has possession of third party assets allowing an administrator to apply for an order allowing him to sell them.

The Facts

The administrators of a company applied to Court under paragraphs 72 and 68 of Schedule B1 to the Insolvency Act 1986 for permission to sell assets located on its freehold premises pursuant to a chattel hire contract with a group company (the "Assets").

The Decision

  • The Judge refused the application under paragraph 72.  On the balance of probabilities, the chattel hire contract did not give possession of the Assets to the Company; and
  • The Judge refused the application under paragraph 68, which is concerned with safeguarding assets which the administrators of a company think belong to it and not permitting the disposal of those assets. 

Comment

While the sale of assets by administrators where they cannot properly show possession, or cannot properly show that the company is entitled to them, will not be sanctioned due to the risk to third party rights, the case is a welcome clarification of the purpose and extent of administrators' powers under paragraphs 72 and 68.  Administrators and their advisors can now be more confident about the evidence required to justify dealing with assets on the basis of company possession and/or entitlement to them.

Edwards & Ano v Business Environment Ltd & Ors