Media company defeats administration application

25/09/19

On 24 September ICC Judge Prentis dismissed an application by a Chinese businessman for an order for the administration of a high-profile media PLC run by a board of well-known directors with long experience in the stage, TV and film industry. The Company was listed on NASDAQ North, and this listing, together with the nature of its business had proved particularly attractive to Chinese investors wishing to have assets outside the PRC. It had a number of media related investments which made it balance sheet solvent, even though its investments were not easily realisable.

The creditor claimed that the Company was or was likely to be unable to pay its debts as they fell due, and in particular would be unable by April 2020 to repay £2.5 million plus interest in respect of the loans he had made, let alone discharge existing debts to other smaller creditors. He cast doubt on the value of the assets of the Company, or the ability of the Company to realise sufficient fund from those assets in the foreseeable future.

The judge found that the applicant was a contingent creditor, that the Company was or was likely to be unable to pay its debts as they fell due, even though it was balance sheets solvent because of its assets, and that an administration order would satisfy the threshold tests set out in Schedule B1 to the Insolvency Act 1986, and be preferable to liquidation.

He rejected the argument on behalf of the creditor, who relied on dicta in Rowntree Ventures Ltd v Oak Property [2018] PCC 135, that in those circumstances there was little or no room for him to exercise his wide residual discretion to refuse an administration order.

However, the judge disagreed. He acceded to the arguments on behalf the Company that it would be an advantage to both creditors and shareholders to allow it to remain in the hands of the existing directors, not least because of their expertise and reputation in the field in which the Company operated, but also because it would retain its NASDAQ North listing. Although the creditor had a potential motive to fund the administration, the continued running of the company and/or orderly disposal of the assets, in particular investments in two particular private companies, and there was hearsay evidence that he intended to do so, the evidence was thin. Furthermore, the proposed administrators had put forward no specific evidence as to how they would set about running the company as a going concern, pursuing the claim made by the Company against the creditor, or liquidating the assets in a specialised market. Furthermore administration would necessarily involve substantial costs.

There was evidence that further funds might come into the Company in the reasonably near future, and the existing directors were best placed to run the Company and find buyers for its specialised assets if arrangements for further substantial funds from investors fell through.

In the exercise of his discretion he therefore dismissed the application with costs.