VTB Capital Plc (in administration), Re
[2024] EWHC 1777 (Ch)
KRF Services (UK) Ltd & Ors, Re
26 November 2024
[2024] EWHC 2978 (Ch)
High Court
A company faced financial trouble because its owner was sanctioned. The court decided it was okay to appoint administrators to help manage the company's assets and debts fairly, even though it was connected to someone under sanctions. The judge made it clear that this action did not break any sanctions rules, and is better than simply letting the company fail.
Key Facts
- •KRF Services (UK) Ltd. (the Company) applied for an administration order.
- •The Company's business involved managing assets for the family of a sanctioned Russian businessman.
- •Sanctions imposed on Dr. Kantor prevented the Company from operating normally.
- •The application faced challenges due to the sole director's authority and funding issues.
- •Keltbray Ltd., a major creditor, applied to be joined as an applicant.
- •The Company was cash-flow insolvent and potentially balance sheet insolvent.
- •The court considered the impact of sanctions on the administration order.
Legal Principles
Preconditions for an administration order: (1) Company unable to pay debts; (2) Administration reasonably likely to achieve its purpose.
Insolvency Act 1986, Schedule B1, paragraph 11
Meaning of 'likely' in the context of insolvency: More probable than not.
Re AA Mutual International Insurance [2005] 2 BCLC 8
Meaning of 'reasonably likely' in the context of achieving administration's purpose: Real prospect, not necessarily >50% chance.
Re European Directories (DH6) BV [2012] BCC 46
Purposes of administration: (1) Rescue as a going concern; (2) Better result for creditors than winding up; (3) Realisation of property for secured/preferential creditors.
Insolvency Act 1986, Schedule B1, paragraph 3
Validity of a single director's resolution in a company with Model Articles: Valid if no article requires more than one director.
Companies Act 2006, section 154; Model Articles, Articles 7 and 11; Re Active Wear Ltd. [2023] BCC 14; Re Fore Fitness Investments Holdings Ltd. [2022] EWHC 191 (Ch)
Impact of Sanctions Regulations on court proceedings: Fundamental right of access to court can only be curtailed by unambiguous primary legislation; Sanctions Regulations must be interpreted to minimize interference with this right.
PJSC Bank v Mints [2024] KB 559; Sanctions and Anti-Money Laundering Act 2018 (SAMLA)
Outcomes
Keltbray permitted to appear and be joined as a third applicant.
Appropriate given the circumstances and to avoid further delays.
Sole director's resolution to apply for administration was valid.
Article 7(2) of the Model Articles disapplies quorum requirements when only one director exists.
Administration order granted.
Company unable to pay debts; administration reasonably likely to achieve a better outcome for creditors than winding up; making the order does not breach Sanctions Regulations.
Ancillary orders granted to allow administrators to open bank accounts, manage existing banking, and potentially use the Insolvency Service Account (ISA).
To facilitate the administration process, subject to obtaining necessary licenses.