No Distribution Of The Ring-Fenced Fund In An Administration

Not a novel point or an unexpected result, but Hydroserve is the first known case of the court disapplying the ring-fenced fund provisions in section 176A(2) of the Insolvency Act.

Section 176A(3) says that the requirement in sub-section (2) to make the ring-fenced fund available for unsecured creditors will not apply if the liquidator or administrator thinks the cost of making a distribution to unsecured creditors would be disproportionate to the benefits. Section 176A(2) may also be disapplied if the administrator applies to court on the grounds that the cost of making a distribution would be disproportionate to the benefits and the court so orders.

In this case the company had gone into administration, owing about £3.5 million to 126 unsecured creditors, and having given a floating charge to its bank. A major part of the £3.5 million was owed to the four group creditors. The ring-fenced fund would have amounted to some £35-40,000, but the share of this which would have been