UK Coal Operations Ltd, Re

In this application concerning UK Coal Operations Limited Mr. Atherton QC, for the newly appointed administrators, upon undertaking to issue a formal application to seek the relief which I am now about to grant, asks for the administrators to have permission to dispense with the requirements of paras.49 and 51 of Schedule B1 of the Insolvency Act 1986.

In jurisdictional terms he relies upon my own decision in Re Advent Computer Training Limited (No. 2) [2011] B.C.C. 52, where, in order to preserve commercial confidentiality, I dispensed with the requirement for certain of the administrators’ proposals to be sent out under para.49. In this case Mr. Atherton QC seeks to dispense entirely with the requirement of administrators` proposals. He also seeks to dispense entirely with the requirement for an initial creditors’ meeting under para.51 of Schedule B1. The reason he does that is that the administration order which I made earlier was made in relation to four companies in the same group. There is a proposed restructuring following sophisticated advice which will enable all four companies entering into administration to produce a better result for creditors than would ensue in the case of an immediate liquidation. However, for that restructuring to take place, immediate control needs to be taken by the administrators of all four companies. I should say there are different administrators for two of the companies.

As a result of various liabilities to which UK Coal Operations Limited is subject, the intention is, within a matter of days, that that company should enter into creditors’ voluntary liquidation pursuant to para.83 of Schedule B1 so as to enable the liquidators, who will be the same individuals as the administrators, to disclaim onerous liabilities. It might be said that that could be achieved without the intervention of an administration, but that would give rise to problems in terms of the necessary period of notice required to be given to creditors and the inability of the liquidators to act in the meantime without court sanction: section 166(2) of the Insolvency Act 1986. Accordingly, the easiest and most efficient way of dealing with the matter is by this process of administration followed by a more or less immediate liquidation.

As there will not be an administration for more than a few days, it is plainly pointless for proposals for achieving the purpose of the administration to be put to creditors, or sent to the registrar of companies or members. The restructuring and ensuing liquidation will take place before those proposals can be considered. There is a period of up to eight weeks under para.49(5)(b) of Schedule B1 for those proposals to be sent, by which time the company will be in liquidation. Likewise, the creditors’ meeting can take place up to ten weeks beginning with the date of administration: para.52(2)(b), By then the company will be in liquidation. In those circumstances, it seems pointless to either to make formal proposals or for such proposals to be considered by an initial creditors’ meeting.

Under para.49(7) and 51(5) respectively, an administrator commits an offence if he fails without reasonable excuse to comply with, in the first case, subparagraph (5), which is the requirement to send a copy of the proposals to various people, including creditors and, in the latter case, to comply with a requirement of para.51. In the Advent Computer Training case already mentioned, I expressed the view that commercial necessity might amount to a reasonable excuse, and that, in those circumstances, the appropriate course, rather than to leave the administrators wondering whether they were liable to a criminal process, was to direct them to act in a particular way (when that was properly required) contrary to the requirements of, in that case, para.49. Exactly the same reasoning applies to para.51. In my judgment, there is a reasonable excuse in this case for non-compliance with either of those paragraphs, that reasonable excuse being to avoid the pointless expense of making formal proposals, sending copies of the proposals out and considering the proposals at a creditors’ meeting when, by the time the meeting takes place, the company will no longer be in administration, and the proposals can no longer sensibly be considered. The proposals have been more than adequately explained to the court, which has made administration orders in the light of the restructuring proposals, and that is sufficient.

In those circumstances, it is appropriate to direct the administrators not to comply with the requirements of paras.49 and 51, and I do so.