Facts

Longmeade went into compulsory liquidation. The liquidators were advised that the company had a good claim against BIS. The liquidators has secured third party funding in respect of the claim, which if successful, would double the dividend for creditors. However, 99% by value of the creditors of the company opposed the commencement of an action against BIS. The position of the few remaining creditors was unclear. The liquidators applied to the court for directions as to whether to cause the Longmeade to pursue the claim.

Held 

Following the implementation of the Small Business, Enterprise and Employment Act 2015 (SEEBA 2015), liquidators no longer require the sanction of the court or creditors before commencing legal proceedings in the name of the company: s 167 of SEEBA 2015; s 167 and Sch 4 of the Insolvency Act 1986. Post-SEEBA 2015, the approach of the court to the exercise of that power by liquidators is as follows (per Snowden J at para 66):–

  • a decision as to whether to commence proceedings in the name of the company is a commercial decision which the liquidators are entrusted to take without obtaining sanction from the court or the liquidation committee;
  • the liquidators should act in what they believe to be the best interests of the insolvent company and all those who have an interest in its estate;
  • the liquidators should normally give weight to the reasoned views of the majority of such creditors provided that they are uninfluenced by extraneous considerations;
  • if all those who are interested in the insolvent estate are fully informed and are unanimously of the same view, the liquidators should ordinarily give effect to their wishes;
  • the court should not generally become involved in giving directions to liquidators as to how to make commercial decisions; and
  • the court should not generally interfere with the decision of liquidators after the event, unless the decision was in bad faith or no reasonable liquidator could have taken it.