CR-2025-007487
IN THE MATTER OF SIGNIFIER MEDICAL TECHNOLOGIES LIMITED
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
B E T W E E N:
(1) SEGULAH MEDICAL ACCELERATION AB
(2) ALAN HOWARD
(3) SPEECA LIMITED
(4) RACHEL DEVINE
(5) AADARSH MALDE
(6) KIERAN GALLAHUE
(as trustee of THE GALLAHUE IRREVOCABLE TRUST)
(7) MARY GALLAHUE
(as trustee of THE GALLAHUE IRREVOCABLE TRUST)
(8) JIM HINRICHS
(as trustee of THE HINRICHS JOINT REVOCABLE TRUST)
(9) FELICIA HINRICHS
(as trustee of THE HINRICHS JOINT REVOCABLE TRUST)
(10) STUART RILEY
(11) RICHARD JACKSON
(12) DCMS HOLDINGS LIMITED
(13) TOBY CHAPMAN
(14) MARK WEBSTER
(15) MARTIN SWEENEY
(16) MOORE INVESTMENT HOLDINGS LTD
(17) OLIVER COX LIMITED
(18) WARREN TAYLOR
(19) WEST 35 LTD
(20) ANNA ALLINGTON
(as executrix of THE ESTATE OF CHRIS ALLINGTON)
Applicants
AND
SIGNIFIER MEDICAL TECHNOLOGIES LIMITED
Respondent
Tony Beswetherick KC and Madeleine Jones
(instructed by Proskauer Rose (London) LLP) for the Applicants
Matthew Collings KC and Jonathan Edwards
(instructed by Mishcon de Reya LLP) for the Respondents
Hearing date: 18 December 2025
Approved Judgment
.............................
INSOLVENCY AND COMPANIES COURT JUDGE BURTON
ICC Judge Burton :
This judgment follows a hearing of the Applicants’ application for an administration order to be made in respect of the Respondent (the “Company”).
The Company opposes the application on the following grounds.
It contends that the Applicants lack the necessary standing to pursue the application:
The evidence initially filed in support of the application (set out in the first witness statement of their solicitor, Steven Baker of Proskauer Rose (London) LLP dated 24 October 2025) describes the Applicants as creditors by reference to outstanding principal and interest which they claim to be due to them under the terms of convertible loan notes issued by the Company in June 2021 (the “2021 Notes”). The Company asserts that when the Notes matured, the Applicants’ right to seek repayment of principal and interest was replaced by a right to be issued shares, whereupon it was no longer possible for them to declare an event of default.
Some six weeks after filing the application, on 9 December 2025, Mr Baker provided a third witness statement in which he recognised that the question of whether principal and interest under the 2021 Notes “is central to this Application” but noted that the Six and Seventh Applicants (as Trustees of the Gallahue Irrevocable Trust), Eighth and Ninth Applicants (as Trustees of the Hinrichs Joint Revocable Trust) and the Third Applicant are also creditors of the Company in respect of convertible loan notes dated 28 June 2023 (the “2023 Notes”) which have not yet matured. He concluded: “so on any view these three Applicants have standing as creditors”.
The Company does not dispute that 2023 Noteholders are prospective creditors but submits that:
“it would plainly be wrong to force a company into administration on an application which was urgently pressed on a completely different basis at the behest of creditors who are not due to be paid for years. … It is not open to the Applicants, simply by mentioning it in reply evidence, to advance the application on this basis instead.”
The Company denies that it is or is likely to become unable to pay its debts.
The Company submits that the circumstances in which this application has been brought to court should incline the Court to exercise its discretion in favour of not making an administration order.
Background
The Company is a medical technology business founded by Mr Akhilesh Tripathi and Professor Anshul Sama in 2015. Its core product is a device which uses electrotherapy to treat persons suffering from obstructive sleep apnoea.
Mr Tripathi has been a director of the Company since incorporation. He was also the Company’s chief executive officer until he was dismissed from his role for gross misconduct on 11 August 2023 following an investigation conducted by a specialist employment barrister. Mr Tripathi owns or controls 48.7% of the Company’s issued share capital.
Professor Sama is a consultant rhinologist who invented the device. He has never been a director of the Company and appears to have sold his shares in the Company to Mr Tripathi and an entity controlled by him.
The Company has had several fundraising rounds:
In March 2018, it concluded a Series A round in which Dr Radford, who has provided a witness statement opposing the Application, was the largest investor.
A Series B round took place in March 2019, the terms of which are captured in a “convertible promissory note agreement”.
This was followed in June 2020 by a Series C round, the terms of which are recorded in a “Share Subscription Agreement”.
The 2021 Notes relate to the Company’s Series D fundraising round, the terms of which are set out in documents titled “convertible note agreement”. It appears that $34.7 million was raised as part of this round, of which the Applicants lent a principal sum of $21,938,450. The Company’s liability under the 2021 Notes was recorded in the Company’s accounts to 31 March 2023 in the amount of $39,902,032.
A Series E round was concluded on 28 June 2023 with the issue of the 2023 Notes which will be repayable (in cash) on 25 June 2028 or on any qualifying equity funding round that occurs sooner. By this Series E round, the 2023 Note Applicants (i.e. the Third, Sixth, Seventh, Eight and Ninth Applicants) together invested a further, principal sum of $2.3m.
In September 2023 some of the Applicants presented an unfair prejudice petition, naming Mr Tripathi, Professor Sama and the Company as Respondents. In October and November 2023, two Part 8 claims were issued against the Company seeking disclosure of documents and in January and March 2024 some of the Applicants issued further proceedings against Mr Tripathi and a Ms Kent.
The Company has never explained how it spent the funds raised under the 2021 Notes, other than a high-level overview in its 2024 Shareholders’ Report which stated that $25m was spent within 12 months as a result of mismanagement. The same report described the steps taken in 2023 to overhaul its senior leadership “due to their failed commercial strategy and excessive expenditure, the cause of an extensive period of challenging cash flow”. It described the previous leadership team as having brought the Company “into the zone of insolvency” but concluded saying that having taken the advice of insolvency practitioners, “whilst it will take time for matters to settle, … we are confident that challenges can be addressed with realistic prospects of meaningful sources of funding.”
The 2021 Notes had an original Maturity Date of “24 months from the initial funding” which was later extended, at least in relation to some of the Noteholders, to 28 December 2023.
Whilst the 2021 Notes envisaged that on the Maturity Date, they would be paid by way of a share issue with the number of shares calculated pursuant to a pre-agreed mechanism, it is common ground that by the time the Application was filed at court, the Company had failed to issue any shares to the 2021 Noteholders. In an email dated 5 January 2024, Mujtaba Chohan, a director of the Company and its Head of Finance informed Chris Tuohy of the Third Applicant that:
“the Company has a contractual obligation to deal with the conversion of the Convertible Note Agreement dated 16 June 2021 made between (i) the Company and (ii) Speeca Limited (the “D Note”) on its maturity. However, you will appreciate that the Company needs to take certain steps here…”
It appears that one of the matters impeding the issue of shares arose because the Company’s former solicitors were exercising a lien over certain documents. The Company’s new solicitors, Lewis Silkin, explained this to a non-Applicant Noteholder, David Sandrock, on 20 September 2024 and added:
“Until the necessary information and documentation has been provided by Milbank, the Company is not in a position to complete the allocation of shares to Series D investors. Only when that allocation has occurred will the Company be capable of recording the allocation of shares in the Company’s Register”.
On 15 September 2025, the Applicants’ solicitors wrote to the Company, stating that an Event of Default had occurred and demanding repayment of the amounts due under the Notes. The Company responded by denying that there had been an Event of Default or that it had any repayment obligation, on the basis that:
“[t]he Maturity Date has already passed, and, accordingly the principal on each of [the Applicants’] Notes has already converted automatically”.
The Application was issued on 24 October 2025.
On 7 November 2025, the Company’s board resolved to issue shares in purported compliance with the 2021 Notes and on 27 November 2025 sent share certificates to each of the Applicants except the Fourth Applicant, Ms Devine. The Applicants responded by stating that they do not accept that the shares were validly issued and do not agree to being entered in the register of members in respect of those shares.
The Applicants’ standing as creditors under the 2021 Notes
The Act entitles one or more creditors, including contingent and prospective creditors, to apply for an administration order.
In Hammonds v Pro-Fit USA Ltd[2007] EWHC 1998 (Ch) Warren J held that:
a person holding a disputed debt may make an application for an administration order;
such a person has standing where there is “a good arguable case that debt of a sufficient amount is owing to him”; and
whilst the court has jurisdiction to deal with the application without having to resolve the dispute about the debt, it does not necessarily follow that the disputed debt should be taken into account when assessing solvency for the purposes of section 123 of the Act:
“[55] Thus, focusing on sections 123(1)(e) and 123(2), it has to be proved to the satisfaction of the court that the company is unable to pay its debts as they fall due or that the value of its assets is less than its liabilities. In carrying out that assessment, the debt (where it is disputed or subject to a cross-claim) of an applicant is in no different a position from any other debt which is disputed or subject to a cross-claim. The court will have to form a view on the basis of all the evidence before it whether it is satisfied as required by either of those sections. There is this difference however. The court may, in the exercise of its discretion, require the dispute (about the debt or the crossclaim) to be decided before making an order, either requiring the matter to be determined in a separate action or by deciding the issue itself. In such a case, of course, the court would not need to make a determination about solvency unless and until the dispute had been resolved.”
Mr Collings KC referred to a distinction in the Court’s approach to what amounts to a “good arguable case” when used to determine the jurisdictional gateway for service of documents out of the jurisdiction, and when used in the context of an application for injunctive relief.
In Brownlie v Four Seasons Holdings Inc[2017] UKSC 80 the Supreme Court held that when considering whether to grant permission to serve out of the jurisdiction, a claimant must show that it has the "better of the argument", i.e. a better than 50% chance of success (having held that the word “much” in the formulation “much the better of the argument” added nothing of relevance to the test). In Isobel Dos Santos v Unitel SA [2024] EWCA Civ 1109, the Court of Appeal held that the test to establish whether an applicant has a "good arguable case" in the context of a freezing injunction application (whether interim or final), requires the court to be satisfied that there is a "serious issue to be tried" (requiring more than arguability but not more than a 50% chance of success).
Part of the Court’s reasoning in Isobel Dos Santos for requiring a lower threshold test in the context of a freezing injunction was that the merits of the case would ultimately be revisited and determined at trial, whereas the question of whether a claim falls within any of the jurisdictional gateways will not be subject to further scrutiny later in the proceedings. Mr Collings sought to draw an analogous distinction between an injunction which will be revisited at trial, and the making of an administration order which takes the company out of the control of its officers and into the hands of an insolvency practitioner. The Court should, he says, consider the latter akin to granting final relief against a company and thus only permit a party relying upon a disputed debt to pursue an application for an administration order when it has the better of the argument.
Mr Beswetherick KC resists the Court viewing an administration application with the same degree of finality as suggested by Mr Collings. He refers to the Court of Appeal’s decision in MTI Trading Systems Limited[1998] 2 BCLC(concerning an application to rescind an administration order on the basis of the applicant’s disputed locus)where Saville LJ noted:
“…a sharp distinction to be made between winding up and administration orders. The former bring the life of a company to an end; the latter are designed to revive and to seek to ensure the continued life of the company, if at all possible. The former is in the nature of a final order; the latter is again, by its very nature, an interim measure.”
I note, however, that:
when citing MTI Trading Systems, Warren J stressed that Saville LJ’s judgment addressed the issue in relation to an application to rescind an administration order, not whether the court should make an administration order; and
MTI Trading Systems was decided before the introduction of Schedule B1 to the Insolvency Act, which introduced, for the first time the statutory purpose of administration set out in paragraph 3 of Schedule B1 to the Act.
That purpose comprises a hierarchy of three objectives, only the first of which provides for the company to be rescued. The second objective (achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up without first being in administration) can only be pursued when the administrator thinks that it is not reasonably practicable to achieve the first and primary objective. The second objective often enables some or all of a company’s business to survive (for example by a sale of its business and assets) but the company itself is left behind. The third simply requires realisation of the company’s property to make a distribution to one or more secured and/or preferential creditors. It can only be pursued when the administrator considers that it is not reasonably practicable to achieve the primary and second objectives and where purusing the third objective would not unnecessarily harm the interests of the company’s creditors as a whole.
Whilst the purpose of administration focusses first on the possibility of rescuing the company as a going concern, it also realistically recognises that may not prove to be viable and contemplates alternative scenarios in which often the company is left behind as a worthless shell with the realisations from its assets being distributed pari passu among its creditors.
The purpose and ultimate outcome of an administration will depend upon which of the hierarchy of the three objectives is considered to be reasonably practicable. The objective may change during the course of the administration. In my judgment, it would be wrong, therefore, to focus on the perceived final or interim nature of the statutory administration regime when determining the meaning of “good arguable case” in the context now before me.
At paragraph 53 of his judgment in Pro-fit USA Ltd, having held that an applicant claiming to be a creditor must have a good arguable case that the debt is owing to him, Warren J went on to say:
“Thus even in the case of a disputed debt, such a person may make an application for an administration order. It is then a matter for the discretion of the court whether actually to make an administration order. The court has jurisdiction to deal with the application without having to resolve the dispute about the debt.”
This underlines that the “good arguable case” test merely addresses the applicant’s standing. It does not determine the administration application with finality. Provided an applicant has a good arguable case that they should be considered to be a creditor of the company, any residual doubt is put to one side to enable them to pursue the application. However, that is not an end to the court considering the validity of the debt. In addition to needing to satisfy the court that the criteria set out in paragraph 11 of Schedule B1 have been met (that the company is insolvent and that the purpose of administration is reasonably likely to be achieved) the applicant will also need to persuade the court that it is an appropriate case in which it should exercise its discretion in favour of making an administration order. It is at this stage, that any doubt which the Court may have put to one side when considering the issue of standing may come back into play.
Thus, in my judgment, the appropriate meaning to ascribe to “good arguable case”, when determining whether a party has standing, as a creditor to pursue an administration application, should be aligned with injunction applications and require the applicant to persuade the court that there is a serious issue to be tried as to whether they are, or are not, a creditor.
Applying this test to the circumstances of the case before me, I am satisfied that there is a serious issue to be tried as to whether the Applicants should properly be regarded as creditors of the Company in respect of the sums which they claim to be due to them under the 2021 Notes. They have the necessary standing to bring the application to court.
I shall next consider whether the requirements of paragraph 11 of Schedule B1 to the Act have been met.
Is the Company unable or likely to become unable to pay its debts?
Without including the Applicants’ monetary claim under the 2021 Notes?
The burden of establishing insolvency for the purposes of paragraph 11(a) rests with the Applicants. The Company disputes that it is insolvent. First it does not accept that the sums which the Applicants claim are due to them under the 2021 Notes are properly due and payable. Secondly, it submits that whilst it may be loss-making during the period when developing and pursuing its ambitious plans to sell its new product, it has financial backers with the resources “to see it through”. Dr Radford who has already indirectly invested tens of millions of dollars, has confirmed in his evidence that he has recently injected more cash and will provide further funds if required (which he considers to be unlikely) to avoid cashflow insolvency.
Paragraph 111(1) of Schedule B1 defines a company’s inability to pay its debts by reference to section 123 of the Act. A company is deemed unable to pay its debts on a cashflow basis pursuant to section 123(1)(e) of the Act if it is proved to the satisfaction of the court that the company is unable to pay its debts as they fall due, and is deemed to be insolvent on a balance sheet basis, pursuant to section 123(2) of the Act if it is proved to the satisfaction of the court (on the balance of probabilities BNY Corporate Trustee Services Ltd v Eurosail-UK 2007-3BL Plc[2013] UKSC 28) that the value of the company’s assets is less than the amount of its liabilities, taking into account its contingent and prospective liabilities.
It is often difficult for a creditor, without access to all of a company’s books and records, to provide evidence of its insolvency.
The Applicants submit that the Company is insolvent even without including the amounts which they claim to be due to them under the 2021 Notes:
The Company has not filed any accounts since those lodged, almost a year late, for the period to the end of March 2023. At that stage, the balance sheet is shown to be positive.
Mr Beswetherick highlights the Company’s failure to provide up-to-date financial information and encourages the court to draw an adverse inference from its absence. Despite two witness statements being served on behalf of the Company in response to the Application, one from Dr Radford and one from Mr Bentley, neither has provided up-to-date financial information. Mr Bentley stated in early December 2025 that he expected the 2024 accounts to be available “in the next day or so” and that the 2025 accounts would follow early in 2026.
On 9 December 2025, the Applicants’ solicitors were sent the draft accounts for the period ending 31 March 2024 in which the Company appears to be solvent on a balance-sheet basis. The Applicants submit that they cannot be considered to be reliable. Even ignoring that the 2024 accounts no longer include any liability in respect of the 2021 Notes (which featured as a current liability in the 2023 accounts for $39.9 million), the Company’s solvency can be seen to be largely attributable to trade and other receivables, given a value of $19.898 million. The notes to the accounts explain that $17.2 million of this figure represents sums due from group undertakings which are said to be interest-free, unsecured and have no fixed repayment date. The same accounts show the Company owing group undertakings of $2.9 million. Mr Beswetherick highlights the absence of any evidence demonstrating the ability of these other group undertakings to repay the debts said to be due from them. The Group’s consolidated balance sheet extinguishes the intra-group debts and reveals, as at 31 March 2024, net liabilities of $2,565,433. It can thus be seen, he submits, that if the other group companies were called upon to repay the sums due from them, they would be unable to do so.
The Company’s accounts to 31 March 2024 include “trade payables” of $5.8 million. If one removes the intra-group debts due to the Company of approximately $17 million, that leaves the Company with significantly fewer assets than required to meet the trade payables which, notably, have increased from the previous year.
Mr Beswetherick invites the Court to infer, from the Company’s failure to provide up-to-date accounts (those latterly provided having only taken the position up to March 2024 – some 20 months ago) that the Company’s financial position has deteriorated. Ten years into its life, the Company has not made a profit. Whilst Mr Bentley’s evidence states that revenue has increased significantly and gross sales to the end of the 2026 financial year are forecast to reach $30 million, he makes no mention of the amount actually received to the end of the most recent financial year (i.e. to 31 March 2025), nor the amount received to the date of the application.
It is the Applicants’ case that when these factors are viewed against the Company’s failure to repay the debts due to Mr Tripathi (the most recent amount falling due for payment in September 2025 but extended to March 2026) and its reliance upon Dr Radford for working capital, the Court can safely conclude, even making no provision for the 2021 Notes, that on the balance of probabilities, the Company is balance-sheet insolvent.
In response, Mr Collings highlights that:
the notes to the accounts record that the Company’s most valuable asset, its intellectual property, has been included at cost. Consequently, as seen in the consolidated accounts, its value has reduced each year due to amortisation. Mr Bentley recognises in his witness statement that:
“the economic fair value of the intangible assets depends in large part on establishing the level of revenue”
and then states, by reference to valuations obtained in 2017 before the product was approved by the FDA (Food and Drug Administration) in the USA, why he considers its value to be higher than the amortised figure which appears in the accounts;
the “other loans” shown as current liabilities for $2,567,708 are the sums due to Mr Tripathi who has agreed to defer repayment;
the $5.2 million “non-current liabilities” comprise (i) sums due to directors where there is no immediate pressure to repay, and (ii) the sums due under the 2028 Notes which have not yet matured;
there are no other creditors pressing for payment, serving statutory demands etc; and
according to Mr Bentley’s evidence, once the Company’s accounts are filed, it should be able to claim a research and development tax credit of approximately $1.3 million.
The Company’s failure to provide up-to-date financial information to demonstrate its solvency to the Court, even in the face of an administration application and after a short adjournment in which it could have sought to do so, does indeed lead me to infer that those accounts may well not paint as attractive a picture of the Company’s finances as it would like. However, I am not prepared to infer that that is definitely the case. The Company’s future prospects lie in its ability to exploit the value of its intellectual property. It did not appear to be in dispute that there is a vast, and as yet untapped market for its revolutionary sleep apnoea product. Even drawing the adverse inference that I have been invited to draw, in my judgment, that is not sufficient to tip the scales of probability in favour of determining that the Applicants have met the burden of proving to the Court that, putting to one side the Company’s alleged liability under the 2021 Notes, it is insolvent on a balance-sheet basis.
Are the Respondents current creditors for $26 million under the 2021 Notes?
It is common ground that prior to conversion, each 2021 Noteholder was a creditor of the Company and that their investment should be converted to equity on maturity. However, the parties are at odds regarding the rights and remedies available to the 2021 Noteholders following the Company’s failure to issue shares more than 18 months after the maturity date. They agree that this requires the Court to interpret the terms of the 2021 Notes in accordance with the principles governing the construction of contracts.
The construction of contractual clauses
The relevant principles did not appear to be controversial. Mr Beswetherick referred inter alia to the approach taken by the Court of Appeal in Wood v Capita Insurance Services Ltd [2017] AC 1173, and by the Supreme Court in Arnold v Britton[2015] AC 1619 and Rainy Sky SA v Kookmin Bank [2011] 1 WLR 2900 from which I extract the following principles:
where the parties have used unambiguous language, the court must apply it (Rainy Sky paragraph 23);
where the relevant words have more than one potential meaning: “the court must consider the language used and ascertain what a reasonable person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant. In doing so, the court must have regard to all the relevant surrounding circumstances. If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other” (Rainy Sky paragraph 21).
“The clearer the natural meaning the more difficult it is to justify departing from it." (Arnold v Britton paragraph 17).
While “commercial common sense is a very important factor to take into account when interpreting a contract, a court should be very slow to reject the natural meaning of a provision as correct simply because it appears to be a very imprudent term for one of the parties to have agreed, even ignoring the benefit of the wisdom of hindsight.” (Arnold v Britton paragraph 20.)
It is a unitary exercise that “involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences are investigated." (Wood v Capita Insurance paragraph 12).
The relevant provisions of the 2021 Notes
The relevant provisions of the 2021 Notes state:
“Maturity: Unless earlier converted, the outstanding principal on the Notes will be due and payable (i) upon 24 months from the initial funding (the “Maturity Date”), at which time it will automatically convert as set forth under Conversion below, or (ii) upon a declaration of an Event of Default by the holder thereof.
Interest Rate: Notes will accrue non-cash interest at a rate of 8% for the first 12 months and 10% for months 13 to 24. Interest will accrue on an annual basis. For the avoidance of doubt, the principal amount for months 13 to 24 will include the interest accrued during months 1 to 12 (ie the principal amount in months 13 to 24 will be $1,080 assuming an initial investment of $1,000).
…
Conversion in Next Qualifying Financing. Upon the Company’s next sale of equity or equity-linked capital to third party investors, in a single transaction or in a series of related transactions with an aggregate value of greater than US$30,000,000, in each case occurring on or before the Maturity Date, but excluding the issuance of shares to employees as part of the Company’s Long Term Incentive Plan, (the “Next Qualifying Financing”), the entire balance then outstanding under each Note shall automatically be cancelled and converted into shares of the Company’s capital stock so issued, with the same rights, preferences and privileges offered, in such financing at (i) a conversion price equal to 85% of the lowest price per share agreed in the Next Qualifying Financing, in the case that the Next Financing occurs on or before the 12 month anniversary of the issuance of the Notes, or (ii) a conversion price equal to 80% of the lowest price per share agreed in the Next Qualifying Financing, in the case that the Next Qualifying Financing occurs after the 12 month anniversary but on or before the 24 month anniversary. In both (i) and (ii) above, the conversion price will be subject to a maximum pre-money equity value of the Company of $400,000,000. In the event that the lowest price per share agreed in the Next Qualifying Financing is equal to or lower than $131.79, the conversion price will be the lowest price per share agreed in the Next Qualifying Financing and the discount in (i) and (ii) above will not be applied. In the event that the application of the discount in (i) and (ii) above to the lowest price per share agreed in the Next Qualifying Financing results in a conversion price below $131.79, the conversion price will be $131.79.
Conversion at Sale or Maturity Date. If all or substantially all of the assets of the Company, or a majority of the voting capital stock of the Company, are sold prior to the Maturity Date, whether through a sale, merger, recapitalization, reorganization or otherwise (including, for the avoidance of doubt, a combination with a Special Purpose Acquisition Company) (a “Sale”), the entire balance then outstanding under each Note shall, immediately prior to completion of such transaction, automatically be cancelled and converted into shares of the Company’s ordinary shares, such shares to be transferred in such Sale or to participate in any distribution of Sale proceeds, if relevant, on a pro rata basis, at (i) a conversion price equal to 85% of the lowest price per share agreed in such Sale, in the case that the Sale occurs on or before the 12 month anniversary of the issuance of the Notes, or (ii) a conversion price equal to 80% of the lowest price per share agreed in such Sale, in the case that the Sale occurs after the 12 month anniversary but on or before the 24 month anniversary. In both (i) and (ii) above, the conversion price will be subject to a maximum pre-money equity value of the Company of $400,000,000.
If the Notes have not yet been converted into shares upon the Maturity Date, then such Notes shall be converted into the Company’s most-senior class of shares at the time of conversion at a price per share equivalent to an equity value of 100% of the Company of $160,000,000.
Upon any conversion, the Noteholders will be required to adhere to the Company’s Articles of Association then in effect, which shall contain customary drag along and tag along provisions (with the threshold for tag rights to be triggered if Akhil Tripathi and/or Anshul Sama sell shares representing more than 10% of the share capital in aggregate).
…
Events of Default: Each Noteholder shall be entitled, in its sole and absolute discretion upon the occurrence of any of the following (each, an “Event of Default”), to declare the entire balance under its Note due and payable:
(a) the Company fails to make any payment under such Note or any other indebtedness for borrowed money when due;
(b) a receiver is appointed for any material part of the Company’s property, the Company makes a general assignment for the benefit of creditors, or the Company becomes the subject of any other bankruptcy or similar proceeding for the general adjustment of its debts or for its liquidation; or
(c) the Company’s Board of Directors or shareholders adopt a resolution for the liquidation, dissolution or winding up of the Company.
…
Indemnity: The Company shall indemnify each Noteholder and hold each Noteholder harmless from any losses, costs or expenses, including attorneys’ fees, which such Noteholder may suffer or incur by reason of pursuing collection of their Note due to the failure of the Company to perform any of its obligations under such Note or this Agreement.
Representations: The Company hereby represents and warrants to the following:
…
• The Company shall procure that the board of the Company shall at all times, prior to the Maturity Date, have authority pursuant to the Company’s articles of association and any applicable legal and regulatory requirements to issue shares in the capital of the Company in satisfaction of the conversion requirements in accordance with the terms of this agreement and free of any preemption rights.”
Interpretation of the 2021 Notes
The 2021 Notes do not include a timetable or deadline for the issue of shares and do not expressly contemplate the Company failing to issue the shares. The Applicants submit that it is not necessary for the Court to determine a period of time that would be “reasonable” to effect the issue of shares, because the Company’s failure to do so until it very recently purported to do so, was not reasonable.
The Applicants contend that the 2021 Notes should be construed to mean that:
on the Maturity Date, the Company was obliged to (i) repay the loan, and (ii) discharge that obligation by way of a share issue;
the Company’s failure to issue the shares amounted to “a failure to make a payment under the Notes”, which comprised an Event of Default. That Event of Default was declared by the Applicants’ solicitors’ letter to the Company dated 15 September 2025;
following the Applicants’ declaration of an Event of Default, it was no longer open to the Company to discharge its obligations by issuing shares.
The Conversion clause only provides for the 2021 Notes to be “cancelled” in two of the three contemplated scenarios, each of which arises before the Maturity Date. There is notably no provision for the 2021 Notes to be cancelled on the Maturity Date. That is because the Maturity clause makes clear that the principal becomes due and payable on the Maturity Date, at which point the Company was obliged to issue and allot shares. Once it had done so, the debt obligation would be extinguished.
It is well established that “payment” need not be monetary but may be in kind (see White v Eldmere Estates Limited [1960] 1 QB 1 at page 16). When the Company failed to issue the shares, it failed to make payment in the form of a payment in kind. That failure comprised one of the prescribed Events of Default: “(a) the Company fails to make any payment under such Note or any other indebtedness for borrowed money when due”.
Such an interpretation of the payment obligation is consistent with the 2021 Notes’ Prepayment clause which states that the notes are “Not prepayable prior to Maturity Date or conversion”. That necessarily implies that they will be payable on maturity.
There are no circumstances under which, other than pursuant to an Event of Default, the Company is obliged to make any payment to the Noteholders. Event of Default (a) (“the Company fails to make any payment under such Note or any other indebtedness for borrowed money when due”) would be redundant if it did not encompass a failure to pay on Maturity (by issuing shares).
Describing the conversion as “automatic” does not mean that on Maturity, the Company’s obligation to pay the underlying debt automatically converts into an obligation to issue shares. It means that the Noteholders need do nothing more to authorise the Company to give effect to the conversion. For example, they do not need to give notice of their desire to receive shares. On Maturity, everything that needs to be done (passing the requisite resolution and issuing the shares, as it has latterly purported to do) is in the hands of the Company. This aligns with Snowden LJ’s interpretation of “automatic” in DnaNudge Limited[2023] EWCA Civ 1142(paragraph 62).
It is also consistent with the final element of the Conversion clause which provides that upon conversion, the Applicants will be obliged to adhere to the Company’s Articles of Association’s drag-along and tag-along provisions. It would make no commercial sense to require Noteholders to adhere to such provision at a time when the shares have not even been issued.
The Applicants submit that this interpretation is coherent, consistent with the language and commercially sensible. The 2021 Notes are designed for cautious investors where the investment will be held in debt for two years and where the widely-drawn Event of Default clause provides that there is a default whenever the Company fails to make any payment of borrowed monies on time. Mr Beswetherick explains in his written submissions:
“The rationale is clearly that any such failure to pay might be a precursor to insolvency, and the 2021 Notes are drafted to give protection to investors in such a scenario, or conversely (from the Company’s perspective) to give sufficient comfort so that investors are willing to invest despite present uncertainty as to the Company’s future.
It would fly in the face of common sense if the terms of an investment designed to give protection to the Noteholder were interpreted so that (for example) the Noteholders could declare an event of default and claim back their loans if the Company defaulting in re-paying £100 to a third party, but not if following the Maturity Date the Company failed to do the very thing it was supposed to do (issue shares), so that the Company could with impunity decline to issue shares.”
The Company contends that the Applicants’ approach requires the Court to construe the contract in a strained, internally inconsistent and unworkable way:
“Conversion” on Maturity effects a substantive change in the Noteholders’ rights. Immediately upon Maturity, and without either party having to take any further steps, the Noteholders cease to have the benefit of a debt owed to them by the Company and instead gain a present right to be issued shares in the Company;
If the Company fails to take the necessary steps to complete that conversion into shares, the Noteholders’ remedy lies in a claim for specific performance. The Noteholders might also take the necessary steps to pursue a restitutionary remedy on the basis that the Company’s failure to issue the shares gave rise to a repudiatory breach or a total failure of consideration.
This is consistent with the cancellation provisions of the Conversion clause. The balance outstanding under each note needs to be cancelled upon the “Next Qualifying Financing” (“NQF”) or upon “Sale” because those events take place at a time before Maturity and do not comprise an Event of Default. The cancellation of the balance then outstanding under the note ensures that there can be no argument that the 2021 Notes convert into shares whilst the balance of the underlying loan remains due and continues to accrue interest. Similar wording is not required on Maturity because the Maturity clause expressly provides that unless earlier converted (in which case the balance outstanding will have been cancelled) the outstanding Principal will be due and payable and automatically convert “as set forth under Conversion below”. At that moment, the debt is replaced by a right to be issued shares.
There is no justification for the Court to introduce a condition that the debt obligation is only extinguished once the Company has issued and allotted the shares.
The reason the 2021 Notes do not include any provision specifying how much time the Company has to issue the shares before the Noteholders can call an Event of Default is because the problem does not arise at all: the automatic conversion of their rights takes place on Maturity.
“Payment” as used in the 2021 Notes, always refers to monetary payment. The Applicants’ interpretation would be internally inconsistent: it requires the Court to construe “payment” which is “due” in the Events of Default clause so widely as to encompass payment by the issue of shares, while at the same time, “insisting that ‘due and payable’ necessarily means payment in US dollars rather than payment in the form of shares”. This is consistent with the meaning of “payment” in the Prepayment clause. Payment there, must mean monetary payment. It is also consistent with payment needing to be made in the event that the Company fails to meet its obligations under the Information Rights provisions (bearing in mind that several of the 2021 Noteholders are already existing shareholders), thus triggering the Indemnity provisions.
The Event of Default clause must be read alongside the Maturity Date clause. The latter is prefaced by the words: “Unless earlier converted”. Consequently, each of (i) (automatic conversion) and (ii) (a declaration of an Event of Default) ceases to be relevant once a conversion has occurred. The contract is clear when conversion occurs: it happens on Maturity. It would be wrong to treat references in the contract to conversion as if they are references to completing the formalities and issuing the shares.
The Event of Default provisions only apply during the initial two-year period. At the end of that period, the Noteholders’ rights are automatically converted to a right to be issued shares, after which there is no room for an event of default. If it were otherwise, there could be a perpetual risk of an Event of Default arising including in circumstances where the Company is diligently putting in place the mechanics to issue the shares, and at the same time, a Noteholder declares an Event of Default.
Construction: decision
The parties’ submissions demonstrate that the terms of the 2021 Notes could be considered to have more than one potential meaning. It falls to me to consider the language used and to ascertain what a reasonable person, with all the background knowledge which would reasonably have been available to them, would have understood to be the intended meaning. As noted in Rainy Sky, I am entitled to prefer the construction that is consistent with business common sense.
Mr Collings urges me to construe “pay” only to refer to an obligation to pay money. He does not go so far as to submit that is the “only natural meaning” of the verb, nor that the language of the 2021 Notes is unambiguous. At first blush, the words of the 2021 Notes do indeed appear to be referring to a money payment. I consequently started the iterative process by seeking to identify the extent to which the Company’s interpretation would give rise to apparent consistencies or inconsistencies with the remaining provisions of the 2021 Notes and the extent to which, in the light of those provisions and the relevant circumstances, it appears to make commercial sense.
I then repeated the process but this time, deploying the interpretation contended for by the Applicants. Having started from a position where the phrase “fails to make any payment” in the Events of Default clause, initially appeared to me to be referring to a monetary payment, I sought carefully to ensure that during that process, I was not straining to interpret “make payment” more widely, simply to provide the Noteholders with a remedy which they omitted to secure for themselves when entering into the bargain. As held by the authorities to which I have already referred, it is not for the Court to remedy imprudent terms.
Perhaps inevitably, neither gave rise to a perfect interpretation, but for the reasons which follow, I prefer the construction contended for by the Applicants. In my judgment, it is both consistent with business common sense and with the majority of the other provisions of the 2021 Notes to interpret “payment” as it is used in the Events of Default clause, to include payment by means of issuing shares.
The Maturity clause cannot be read in isolation. It expressly provides that on the Maturity Date, the outstanding principal on the Notes “will automatically convert as set forth under Conversion below”. The Conversion clause commences: “If the Notes have not yet been converted into shares upon the Maturity Date, then such Notes shall be converted into the Company’s most senior class of shares” (my emphasis). It does not say that they shall be converted into a right to receive shares.
The parties propose different interpretations of the words “shall be converted”. In order to ensure consistency with the Company’s interpretation, Mr Collings submits that they mean that the conversion is mandatory. If that is correct, then it seems to me that “shall be converted” is otiose because, according to the Company’s case, the debt has already automatically converted into a right to receive shares.
In my judgment, the use of the phrase “shall be converted” underlines that the conversion does not take effect until the shares are issued. The Applicants’ approach creates an operative provision: it sets out what must be done to complete the conversion. If it were to be read in the manner contended for by the Company, then there are no express, missing steps to be taken by the Company which could be the subject of an application for specific performance. On the Company’s case, the conversion has already taken place “automatically” (cancelling the debt and replacing it with a right to receive shares). There is no express obligation on the Company to issue those shares.
The 2021 Notes expressly exclude any scope for pre-payment. There are no circumstances under which, other than pursuant to an Event of Default, the Company is obliged to make any payment to the Noteholders, thus rendering Event of Default (a) (“the Company fails to make any payment under such Note or any other indebtedness for borrowed money when due”) redundant if it does not encompass a failure make a payment in kind following the Maturity Date by issuing the shares. Mr Collings’ reference to a breach of the Information Rights clause in circumstances where one of the Noteholders already happened to be a shareholder of the Company, triggering the Indemnity provisions and, in turn, an Event of Default did not, in my judgment, provide a credible, or commercially sensible alternative reason for the Notes to be drafted in this manner.
The Applicants’ propounded construction is consistent with the Noteholders’ obligation, set out at the end of the Conversion clause, to adhere to the Company’s Articles of Association, including in respect of any drag-along and tag-along provisions. In my judgment it would make no commercial sense for the Noteholders to be bound by drag-along and tag-along provisions at a time when they do not hold any shares and are not entered in the register of members.
When performing the iterative process, I did not find any justification for the Court to interpret the Maturity clause to mean that the debt obligation is extinguished before the Company has issued the shares. Such an interpretation is only necessary if “automatically converts” takes the meaning contended for by the Company, but as above, I do not consider that to be correct. In my judgment, and in circumstances where there are a large number of Noteholders, “automatically” here simply means that following the Maturity Date, they need take no further steps before the Company becomes obliged, in accordance with the Conversion clause, to issue the shares.
In reaching this conclusion, I have taken into account that both parties provided reasons to explain the omission of any reference to cancellation of the shares in the Maturity clause, as it appears in the Next Qualifying Financing (“NQF”) and Sale provisions of the Conversion clause. The Company’s interpretation highlights that following a NQF or Sale, the outstanding balance is expressly cancelled and converted into shares – such that if the Company were to fail, in those circumstances to issue the shares, there could be no question of the Noteholders having retained a right to payment. I think the answer here, however, lies again in the absence of any words to the effect that the debt be converted into a right to receive shares and by the inclusion of the conversion being into the Company’s capital stock “so issued” (NQF), or in relation to a Sale for “such shares to be transferred in such sale”. Thus, for example, on Sale the Noteholders’ protection lies in the mechanics of the arrangement. The debt is only cancelled when the sale takes place, whereupon they either receive shares which are included in the sale or a share of the proceeds to the value of the shares they are entitled to receive. There are no equivalent provisions on Maturity which protect the Noteholders from the risk of the Company failing to issue the shares. Consequently, on Maturity, the debt is expressed to become due and payable.
The fact that the debt obligation becomes due and payable is the complete opposite of saying that on the Maturity Date it is cancelled. It is entirely consistent with the interpretation summarised at (i) to (vii) above, that it remains due and payable until the shares are issued. Whilst Mr Collings submits that the parties entered into a simple debt for equity bargain which did not anticipate the Noteholders receiving a monetary payment unless something went wrong before the Maturity Date, in my judgment, that does not mean that business common sense would expect the Noteholders to have agreed to expose themselves to a scenario where, on the expiration of 24 months, the Company could walk away from its obligation to issue shares, leaving them without the benefit of either debt or shares, but simply a right to bring proceedings to enforce the intended bargain.
The absence of any prepayment provisions demonstrates that the focus was on gaining equity at an attractive rate as a reward for Noteholders’ willingness to invest early in a relatively new company developing the product it wished to take to market. If the Company were to enter liquidation before the Maturity Date, the Noteholders would be treated as unsecured creditors for the principal and interest due under the Notes. It does not make business sense, that having built such protections into the 2021 Notes, the parties then intended that in the event the Company failed, as it has done, to issue the shares almost two years after Maturity, the investors would lose everything except a right to bring proceedings to enforce their contractual entitlement to receive shares.
For each of these reasons, in my judgment, the Applicants continued to be entitled to declare an Event of Default, as they did in September 2025, after which it was no longer open to the Company to purport to issue shares in compliance with their obligation to do so that arose nearly two years earlier. Having failed to pay the sums claimed in the Applicants’ letter of demand, the Company remains indebted to the Noteholders for a total figure in excess of $26 million.
It does not appear to be in dispute that if the Court were to reach this conclusion, the Company is insolvent on both a balance-sheet and cash-flow basis.
Is the purpose of administration reasonably likely to be achieved?
I have already noted that the purpose of administration comprises a hierarchy of three objectives. It is not necessary for an applicant to specify the objective which is most likely to be pursued; the Court simply needs to be satisfied that it is reasonably likely that one of those objectives will be achieved (Key2 Law (Surrey) LLP v De’Antiquis [2011] EWCA Civ 1567).
The Applicants propose that Mr Charters and Mr Diss, both licensed insolvency practitioners at Grant Thornton be appointed as administrators of the Company.
Mr Charters has provided a witness statement addressing the strategy and steps which, if appointed, the proposed administrators would take. He recognises the constraints imposed upon the advice he has been able to give as a result of the limited financial information made available by the Company. He nevertheless explains why, from the information that he has seen, he does not consider a rescue of the company could reasonably be achieved but why he is of the view that the second statutory objective, obtaining a better result for creditors as a whole than if the Company were to enter liquidation, could realistically be achieved. In doing so he notes that it is anticipated that funding will be required to support the administration process and that discussions with existing investors indicate a willingness to provide up to £100,000 plus VAT and costs to ensure that the administrators have sufficient working capital to carry out their duties effectively.
I am satisfied from the evidence before me that if the Court were minded to make an administration order, the purpose of administration is reasonably likely to be achieved.
Should the court exercise its discretion in favour of making or refusing to make an administration order?
The Company’s own communications with investors have referred to historic mismanagement. Mr Collings sought to persuade the Court that this application has been a “wake-up call” for the Company. New directors have recently been appointed, additional funding is available, if needed, from Dr Radford and the Company has an excellent product in respect of which sales are now taking off. This is not the time, he says, to pull the rug from underneath the Company. In the event that the Court concludes, as I have done, that the Applicants are present creditors for an amount in excess of $26 million, the Company would seek a window of opportunity to deal with the claim without entering administration. He highlights the array of orders which, as set out in paragraph 13 of Schedule B1 to the Act, it is open to the Court to make on the hearing of an administration application. They include adjourning the hearing conditionally or unconditionally.
In Rowntree Ventures Ltd v Oak Property Partners Ltd [2017] EWCA Civ 1944, the Court of Appeal held that where the statutory criteria set out in paragraph 11 have been met, it would not usually be right to refuse to make an administration order simply because there may be some possibility of the company advancing prospects of a turnaround:
“[28]… It was logically fallacious in the circumstances of this case to say: (a) on the evidence I have determined that the statutory precondition of insolvency is satisfied on the balance of probabilities; and (b) the main reason why I will exercise my discretion against an administration order is that the company may fare better in the future under its current management. Whilst acknowledging that there is no “normal case”, it would not normally be appropriate to attach great weight to the speculative possibility of turnaround having decided that the insolvency precondition is satisfied. For this reason, in my judgment and in the circumstances of this case, the judge attached too much weight to the possibility of turnaround.”
There is no evidence before me of any, even vaguely articulated, let alone realistic proposal for the Company to be rescued in circumstances where I have held that the Applicants are current creditors for $26 million. There is, however, evidence of historical mismanagement, ongoing conflicts between those currently and historically in control and as demonstrated by the application, a body of significant investors, now creditors, whose patience has run out.
Having satisfied myself that the Applicants are creditors of the Company, that the Company is insolvent and that on the evidence before me, the purpose of administration is reasonably likely to be achieved, in my judgment this is an appropriate case in which the Court should exercise its discretion in favour of making an administration order.
END