In Re Parmeko Holdings Limited the Court had to consider whether to give directions to Administrators where creditors had failed to vote on their proposals. The Court also considered the terms of Administrators’ standard proposals.

In Re Parmeko the proposals provided for the Administrators to:-

  • Continue to manage the company’s business and affairs in accordance with the statutory purposes;
  • Make payments to secured / preferential creditors;
  • Seek one of various exit routes;

And for

  • Discharge from liability;
  • Remuneration.

These proposals were very widely drawn and permissive in style, and largely reflected the powers already given to Administrators by statute.  In the face of creditor apathy (no one had voted), the Administrators sought an order approving their proposals.  The Court found that there was only an obligation for the Administrators to make an application where the failure of creditors to vote gave rise to a real question as to what course of action the Administrators should take.  If proposals are approved then the Administrators are under an obligation to administer the company in accordance with the proposals. However, if no such proposals are approved the Administrators must administer the company in accordance with their own discretion.  In the present case, the proposals largely reiterated the powers contained in Schedule B1 and therefore the Court concluded that it would be "futile" to order that the Administrators continue to "manage the affairs of the company in the extremely unspecific way that would be provided for by these proposals". It is noteworthy that the Court expressly declined to give directions in relation to the Administrators’ release from liability.  The only elements of the proposals before the Court which required approval were those concerning remuneration and expenses, since in the absence of creditor or committee approval, the Court has specific powers in this regard.  For Insolvency Practitioners there are lessons to be learned from this case:-

  1. In the absence of creditors voting on a proposal, the Administrators only need apply to Court for directions if the failure of the creditors to vote gives rise to a real question as to how they should proceed;
  2. Proposal documents should be more specific and not simply re-iterate the wording of Schedule B1. The proposals should set out what the Administrators genuinely anticipate will occur in the administration.
  3. Many standard proposals seek to set a date for the Administrators' release from liability from the outset. In Re Parmeko the Court doubted that this was appropriate because creditors would not know at an early stage whether there would be any claim which would be affected by the release.