Improper Motive May Invalidate Administrators’ Appointment

Administrators will always be keen to satisfy themselves that their appointment is valid. Typically, cases addressing validity have focused on whether the decision to appoint administrators has been properly made, or whether the security under which they are appointed has become enforceable.

This case is different – as we reported last year, the court struck out claims based on an alleged invalid of appointment of administrators in a “loan to own” situation. An entity unsuccessfully bid to acquire a controlling interest, took an assignment of a secured debt and then enforced that security (it was alleged) solely so it could buy the business and assets out of administration. Within two months of the appointment, the shareholders raised funds to clear the debt and the administrators left office. Four years later (and after the appointor had ceased to exist), proceedings were issued against the former office holders alleging, amongst other matters, that the improper motive of the