In a second application heard on the same day, Hildyard J considered an application by the administrators of Lehman Brothers Europe Limited (LBEL) for directions that would enable a surplus to be distributed to the sole member of LBEL while LBEL remained in administration. The proposed scheme had material benefits for both shareholders and creditors. The administrators acknowledged that the orders sought were an indirect means of circumventing the Insolvency Act 1986 (UK), which does not expressly provide for directors to make distributions during an administration. The Court held that the scope and limits of directors' and members' powers in an administration had not been comprehensively defined in either statute or common law. Rather than creating a new rule to fill this gap, the Court held that allowing the proposed distribution would be consistent with provisions in the Companies Act 2006 (UK) that enable capital reductions. To the extent that the distribution did not impede or frustrate the statutory purpose of the administration, it was allowed. The Court emphasised that this case was exceptional in that all interested parties were supportive of the proposal, there was substantial surplus and no intention that LBEL be restored to activities as a going concern following administration.
See the full judgment here.