Cineworld Group Plc, Re
[2023] EWHC 3006 (Ch)
In the Matter of Hawkwing Plc
28 February 2023
[2023] EWHC 407 (Ch)
High Court
A company borrowed money improperly and didn't tell one of its investors. The investor demanded their money back. The court decided the company was broke and appointed administrators to help sort things out and get money back to investors.
Key Facts
- •Hawkwing Plc (the Company) is a cash shell listed on the London Stock Exchange, seeking acquisition opportunities.
- •The Company issued £16.5 million in Convertible Unsecured Loan Notes (CULS), with Hanover Investors Management LLP subscribing to £2 million.
- •The Company loaned £13.7 million to IFG SPP Limited (Guernsey), contrary to the CULS Instrument, which stipulated the loan should go to IFG or its group.
- •IFG SPP Limited went into liquidation, and the recoverability of the loan is uncertain.
- •The Company attempted to obtain waivers from Noteholders for breaches of the CULS Instrument, but failed to send the waiver request to Hanover.
- •Hanover exercised its right to redeem its Notes due to the breaches and lack of notification.
- •The Company disputed Hanover's claim, stating the debt wasn't due and the Company was solvent.
- •Hanover served a statutory demand, and the Company applied for an injunction to restrain Hanover from presenting a winding-up petition; Hanover applied for the appointment of administrators.
Legal Principles
Court may make an administration order if the company is/likely to become unable to pay its debts and administration is reasonably likely to achieve its purpose.
Insolvency Act 1986, Schedule B1, paragraph 11
An administration application can be made by one or more creditors, including contingent or prospective creditors.
Insolvency Act 1986, Schedule B1, paragraphs 12(1)(c) and 12(4)
A creditor has standing if they have a good arguable case that a debt is owing.
Hammonds v Pro-Fit USA Ltd [2008] 2 BCLC 159; Fieldfisher LLP v Pennyfeathers Ltd [2016] BCC 697; Re Berkshire Homes (Northern) Ltd [2018] Bus LR 1744
Inability to pay debts includes cashflow insolvency (unable to pay debts as they fall due) and balance sheet insolvency (assets less than liabilities).
Insolvency Act 1986, section 123
The 'purpose of administration' includes rescuing the company, achieving a better result for creditors, or realising property for distribution to creditors.
Insolvency Act 1986, Schedule B1, paragraph 3(1)
Even if threshold criteria are met, the court has discretion whether to grant an administration order.
Rowntree Ventures Ltd v Oak Property Partners Ltd [2017] EWCA Civ 1944
Outcomes
Administration order granted for Hawkwing Plc.
The Company was found to be both cashflow and balance sheet insolvent, and administration was deemed reasonably likely to achieve a better result for creditors than liquidation. The court considered the views of creditors, giving less weight to those connected to the company.
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