Sale of assets in administration (Re Osmosis Group Limited - 25th May 1999).

United Kingdom

Is the Court's leave required to enable an administrator to sell a company's business prior to holding a creditors' meeting under Section 23 of the Insolvency Act 1986 (the "Act")?

FACTS

When Osmosis Group Limited (the "Company") went into administration, the administrators had already received an offer from a related company (Osmosis Ireland Limited) to purchase various assets, which had been accepted, subject to an independent valuation. A satisfactory valuation was obtained and negotiations resulted in an agreement in principle. A condition of the sale was that it was completed by a certain date, which would not give the administrators sufficient time to convene a Section 23 meeting. Furthermore, the administrators had obtained the consent of both of the Company's largest creditors. The sale was also subject to the Court's approval, and accordingly the administrators applied for such permission.

HELD

The Court's leave was required to enable the administrators to sell assets of the Company prior to a creditors' meeting being convened. The Court had a discretion as to whether to order the sale to take place, and exercised its discretion in favour of the sale in this case. This was largely because the administrators had demonstrated real urgency and the Court derived comfort from the fact that the largest creditors had agreed to the sale.

COMMENT

This decision helpfully clarifies the position, following the uncertainty created by a number of apparently conflicting decisions, as prior to this case, there had been some suggestion (in Re. Consumer & Industrial Press Limited [1990] BCLC) that the administrator did not have the power to dispose of the Company's assets without first giving the creditors an opportunity to consider the proposed sale in a section 23 meeting. It appears that whether or not the Court will give leave will depend upon the circumstances of each case, although administrators wishing to sell assets without first calling a meeting will need to show urgency, and would be well advised to seek the consent of creditors who might have the power to vote against the sale at a creditors' meeting.