Insolvency Oracle

Developments in UK insolvency by Michelle Butler

When does an Administration convert to a CVL under Paragraph 83? The Globespan appeal

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Cartwright & Anor v The Registrar of Companies [2012] EWCA Civ 1159 (24 August 2012)

http://www.bailii.org/ew/cases/EWCA/Civ/2012/1159.html

Summary

Many readers will be aware of the court decision leading to this appeal: Briggs J decided that the date of conversion from Administration to CVL is the date the Paragraph 83 notice is received by the Registrar of Companies (“RoC”).  This appeal considered the RoC’s contention that the conversion date is the date the notice is registered by it.  In short, the court of appeal agreed with the RoC and it considered the vital question arising from this conclusion: what happens if the notice is received by the RoC whilst the Administrator is in office, but is only registered after the Administrator’s term of office has ended, e.g. by effluxion of time per Para 76(1)?  The court decided that there is generally an automatic extension of the Administrator’s appointment to cover this period (provided the notice is duly filed).

The dates in this case

The Administration began on 17 December 2009.  On 13 December 2010, the Administrators signed a Para 83 notice, which was received by the RoC on 14 December 2010.  The RoC rejected it because it did not contain the Liquidators’ addresses, albeit that it contained the Administrators’, which were the same.  After some toing and froing, the RoC finally registered a Para 83 notice (the third one submitted to them) on 4 February 2011, i.e. long after the anniversary of the Administration.

Why the court decided that the conversion date is the date of registration

Lady Justice Arden provided eight reasons for this decision (paragraph 41 et seq.).  In my view, the most persuasive arguments lie in the wording of Paragraph 83(4) and (6).  Para 83(4) states that “On receipt of a notice under sub-paragraph (3), the registrar shall register it”, indicating that receipt and registration are two different events.  Para 83(6) states that “On registration of a notice under sub-paragraph (3), the appointment of an administrator in respect of the company shall cease to have effect and the company shall be wound up as if a resolution for the voluntary winding up under section 84 were passed on the day on which the notice is registered”.  Taken together, I can see why the judge concluded that the date of registration is the conversion date and the judge noted that “the most natural meaning to give it [the word “registration”] is the completion of the steps which the registrar needs to take to make the information in the notice available as part of Globespan’s file at Companies House” (paragraph 43).

In this case, because of all the toing and froing of Para 83 notices, this conclusion led to an interesting result: the Administration moved to CVL on 4 February 2011, almost two months after the anniversary of the Administration.  Fortunately for the Administrators, as Briggs J had already decided that the first Para 83 notice was valid notwithstanding the absence of the Liquidators’ addresses and the RoC had not sought to contest this, the appeal court concluded that “in registering the third conversion notice, the registrar was in fact fulfilling his obligation to register the first conversion notice. That conversion notice was executed and filed when the administrators were still in office” (paragraph 52).  Thus, it was irrelevant in this case that the third notice was sent by the IPs to the RoC long after the anniversary had passed.  I suspect that the situation would have been quite different had there been a real deficiency in the first notice, as this would have meant that any subsequently correct notice would have been filed after Para 76(1) had taken effect to end the Administrators’ appointment.

What is the status of the Administrators between the filing and the registration date?

As mentioned above, the first Para 83 notice was received by the RoC on 14 December 2010; the anniversary of the Administration was 17 December 2010; and the court decided that the move from Administration to CVL occurred on 4 February 2011.  No extension to the Administration was sought under the Act’s provisions, so the question arises: did the Administrators’ appointment end some two months before the company moved to CVL?

Lady Justice Arden decided that “the administrator’s term of office is in general automatically extended if a conversion notice under paragraph 83 is duly filed” (paragraph 58) and she provided five reasons for this judgment.  Personally, I like the judge’s argument that the Act provides for the Administrators to file a Para 83 notice at any time whilst they are in office, i.e. right up to the point when the Administration is about to end (although personally I would still be very nervous about leaving the Para 83 notice to the last minute), but Parliament’s clear intention was to provide a seamless transition between Administration and CVL.  Thus, it would make no sense to require Administrators to seek extensions to Administrations to cover the interregnum from the RoC’s receipt of the notice to the point that it is registered.

Interestingly, the judge stated “on the evidence that [registration of the notice] would normally have happened within about 3 days of 14 December 2010 [the date the notice was received by the RoC]” (paragraph 32).  I have not been at the front-end of filing documents with the RoC for a long time now, but I am surprised to see such a short timescale evidenced as normal – things must have improved a great deal since my days!  Fortunately, in view of the judge’s reasonings, it would seem to me that the length of this time between receiving and registering the notice is immaterial.  Paragraph 64 of the judgment simply states: “an administrator’s term of office is by implication from the words of paragraph 83(6) extended by filing a conversion notice from the date on which it would otherwise expire by effluxion of time until paragraph 83(6) comes into effect on registration of the conversion notice” (although, quite rightly the judge points out that this is subject to the provisions of Paragraphs 87 to 89, i.e. if the Administrator were to die, cease to be qualified etc., during this interregnum).

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One thought on “When does an Administration convert to a CVL under Paragraph 83? The Globespan appeal

  1. Companies House has lodged a statement following the appeal decision explaining the consequences for filing. The statement can be accessed at: http://www.companieshouse.gov.uk/about/miscellaneous/insolvencyCourtOfAppealJudgement.shtml

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