There are various routes by which a company may enter administration. The most common is an appointment by the directors. Alternatively, the holders of a qualifying floating charge may appoint or an application may be made to the court by one or more creditors.

As a result of the various routes of entry into administration, there may be a situation in which a conflict arises between the identities of the proposed administrator. The choice of administrator may be an important factor relevant to the success or otherwise of the administration as well as the confidence that creditors will have in the process and ultimately therefore to the value of the dividend to the creditors.

The recent case of Med-Gourmet Restaurants Limited and in the matter of the Insolvency Act 1986 (Case No: 7680 of 2010 - unreported), highlights this very real situation. Here the directors supported the appointment of one set of insolvency practitioners, which was opposed by a number of creditors who put forward their own choice of insolvency practitioner.

Interestingly, whilst the majority of creditors (by number) supported the directors' choice of administrator, the majority of creditors (by value) wanted their own choice of administrator to be appointed. This therefore resulted in a conflict as regards to the identity of the administrator, which ultimately needed to be resolved by the court.

Lewison J notes in his judgment in Med-Gourmet that in situations where there is a conflict between the creditors' and the directors' choice, the case of Oracle (North West) Limited v Pinnacle Services (UK) Limited [2009] BCC 159 appears to provide some guidance on the matter. In that case, the common sense position prevailed with the creditors' choice of administrator being appointed.

However, as Lewison J pointed out in Med-Gourmet, 'Where there is a conflict between two groups of creditors, in [his] judgment the majority of creditors do not have an absolute right to choose the administrators'.

To support this proposition, Lewison J referred to the case of Fielding v Seery & Another [2004] BCC 315 and Maddox HHJ's comment that '… although the majority vote of the creditors will in the normal course prevail, creditors holding the majority vote do not have an absolute right as to the choice of liquidator'. Whilst this case concerned the identity of a liquidator, Lewison J accepted that 'the same broad principles apply in both liquidation and administration'.

The circumstances in which the majority view does not always succeed appear to arise from situations where there is a risk that an administrator will be unable to satisfy the requirement that their appointment 'must achieve justice between all those who are interested in the outcome of the administration. The office holder needs to both act and be seen to act in the best interests of creditors and to investigate properly all claims. Justice must not only be done but must be seen to be done'.

Accordingly, creditors should not take the identity of the proposed administrator as a fait accompli. Where there is a risk that justice cannot be achieved for all those interested in the outcome of the administration, an application to the court for an alternative administrator should be considered.