The decision is a salient reminder to majority shareholders that the Court does not consider a fettering of their controlling interest and shareholder position by Administrators as unfair harm when that is done to achieve fairness amongst all shareholders including minority interests.
Ashfords LLP and Joe Curl of 9 Stone Buildings were instructed by the Administrators (Richard Toone and Jason Malony of CVR Global LLP) in the decision of Mr Justice Tower in Re Hat & Mitre Limited (In Administration).
Insolvency and Appointment: Absent bad faith or knowledge to the contrary, administrators are entitled to rely on a directors statement of a company's insolvency for the purposes of their appointment. As a matter of proper practice prior to their appointment, administrators should consider documentation supporting the company's insolvency. However, it is recognised that they are reliant on the veracity of the information, documentation and statements provided, which in the case of the Company showed it to be balance sheet solvent, but without monies or funding to meet liabilities due or shortly due, which was sufficient.