THE BUSINESS AND PROPERTY COURTS OF ENGLAND & WALES
INSOLVENCY AND COMPANIES LIST (ChD)
IN THE MATTER OF LONDON ANTIAGING CLINIC LTD
AND IN THE MATTER OF THE INSOLVENCY ACT 1986
Strand, London |
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B e f o r e :
(sitting as a Deputy High Court Judge)
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MARKO VENTURES LTD |
Claimants |
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- and |
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LONDON ANTIAGING CLINIC LTD |
Defendants |
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Oliver Hyams (instructed by Reed Smith LLP) for London Med Aesthetics Limited and Dr Andreas Androulakakis.
Hearing dates: 22 January 2025, 14 February 2025
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Crown Copyright ©
HODGE MALEK KC:
Introduction
The Company
(1) LMA with 10,000 ordinary shares.
(2) MVL with 9,445 ordinary shares and 5555 preference shares.
"5. MATTERS REQUIRING CONSENT OF THE SHAREHOLDERS
5.1 The Shareholders shall, for as long as they hold Shares, procure (so far as is possible in the exercise of their rights and powers) that the Company shall not, without the prior written consent of Marko and LMA:
5.1.12 pass any resolution for the Company's winding up or present any petition for its administration;
5.2 Each Shareholder undertakes to the other Shareholders that at all times during the continuance of this agreement it shall:
5.2.1 promote the best interest of the Company and ensure that the Business is conducted in accordance with good business practice, in each case if and for so long as it is within their power and authority to do so;
5.2.2 exercising all voting rights and powers of control available to it in relation to the Company so as to give full effect to the terms and conditions of this agreement; and
5.2.3 comply in all respects with the Articles.
5.3 The Company shall, and the Shareholders shall procure that the Company shall, conduct the Business:
5.3.1 on arms' length terms; and
5.3.2 in the normal course of business."
"15. DURATION OF AGREEMENT
15.1 Upon a party ceasing to hold any Shares in any manner permitted or authorised by this agreement, this agreement shall cease to bind that party.
15.2 This agreement shall terminate forthwith if:
15.2.1 the Company becomes insolvent (except by reason solely of its inability to repay loans or other sums outstanding to the Shareholders) or goes into liquidation (except for the purposes of a bona fide reconstruction or amalgamation pursuant to which the company resulting therefrom agrees to be bound by or assume the obligations of the Company);
15.2.2 the Company shall have an administrator appointed or any person shall take any steps including filing documents with any court of competent jurisdiction and giving notice of intention to appoint an administrator for the purpose of placing a company in administration or the Company shall have an administrative receiver, receiver or manager appointed over any part of its assets or undertaking or shall suffer any similar event in any jurisdiction; or
15.2.3 all the Shares shall be held by one Shareholder.
".
"20. WHOLE AGREEMENT
20.1 This agreement, and any documents referred to in it, constitute the whole agreement between the parties and supersede any arrangements, understanding or previous agreement between them relating to the subject matter they cover.
".
MVL's funding and investment in the Company
(1) A loan note instrument dated 26 September 2021 ("the Loan Note Instrument") by which the Company created £400,000 Unsecured Convertible Loan Notes 2024 ("the Loan Notes") which were issued to MVL.
(2) A loan agreement between the Company and MVL dated 12 June 2023 ("the Loan Agreement") under which MVL agreed to make a term loan facility up to a maximum aggregate amount of £3 million ("the Facility"). There were 3 amendment agreements increasing the amounts under the Facility:
(a) 5 October 2023 recording that the Company had drawn down £3 million under the Facility (and £1,450,000 additional advances) and increasing the amount of the Facility to £5.5 million.
(b) 29 February 2024 recording that the Company had drawn down £5.5 million and increasing the Facility to £6.5 million.
(c) 8 May 2024 recording that the Company had drawn down £6.5 million and increasing the Facility to £7.5 million.
(1) The Maturity Date is 26 September 2024 (3 years after the date of the Loan Note Instrument, per clause 1.1).
(2) Interest accrues on the Loan Notes at 5% above the Bank of England rate and is payable in cash on redemption or payment (Schedule 2, para.1.1).
(3) Schedule 2, para.4 provides as to once the Maturity Date has been reached:
"4. MATURITY DATE
At any time or after the Maturity Date, the Noteholders shall have the right, by service of an Exercise Notice on the Company, to require repayment by the Company of, all the principal amount of the Notes then in issue (so far as not redeemed in accordance with paragraph 3 above or converted pursuant to schedule 4) together with all interest accrued thereon up to an including the redemption date. Where the Noteholders serve an Exercise Notice pursuant to this paragraph, the Company shall pay the Noteholders such repayment amounts within 10 Business Days of receipt of the Exercise Notice. Failing service of an Exercise Notice, the Notes shall remain outstanding and continue to accrue interest until repayment or conversion."
(4) Schedule 2, para.6 specifies in relation to events of default:
"6. EVENT OF DEFAULT
6.1 The principal amount of the Notes then in issue shall, on receipt by the Company of an Exercise Notice from the Majority Noteholders, automatically be redeemed together with all interest accrued thereon up to and including the date of redemption if:
(a) an administration order is made in relation to the Company; or (ii) an order is made or an effective resolution is passed for the winding-up, liquidation or dissolution of the Company (except for the purpose of reorganisation, reconstruction or amalgamation on terms previously approved in writing by the Majority Noteholders);
(b) the Company is deemed for the purposes of section 123(1) Insolvency act 1986 to be unable to pay its debts or compounds or proposes or enters into any reorganisation or special arrangement with its creditors generally.
(c) default is made by the Company in the due performance or observance of any material indebtedness and such default is not remedied within a period of 14 days following receipt of the Exercise Notice referenced to in this paragraph 6;
(d) default is made by the Company in the due performance or observance of any material obligation (other than for the redemption of principal monies outstanding on the Notes or the payment of interest accrued thereon) on its part contained in this instrument and such default is not remedied within a period of 14 days following receipt of the Exercise Notice referred to in this paragraph 6;
(e) without Consent, the Company grants any Encumbrance over any part of its undertaking or assets, other than an Encumbrance granted in the ordinary course of trading; or
(f) default is made by the Company in the due performance or observance of any material indebtedness and such default is not remedied within a period of 14 days following receipt of the Exercise Notice referred to in this paragraph 6.
6.2 The Company shall give notice in writing to the Noteholders immediately upon the Company becoming aware of the occurrence of an event specified in paragraph 6.1 above, containing reasonable details of that event."
(1) The purpose of the Facility is expressed at clause 3 as follows:
"3. Purpose
The Borrower shall apply all amounts borrowed by it under the Facility towards the payment of development and installation costs incurred by it in connection with the clinic to be operated by the Company at 9 Queen Anne Street, London W1G 9HW. The Lender is not bound to monitor or verify the application of any amount borrowed under the Facility."
(2) The Repayment Date is 12 June 2018 being 5 years after the date of the Loan Agreement (clause 1.1 definition), on which date the loans should be repaid in full (clause 5.1).
(3) Interest is to accrue at 6.5% per annum (clause 6.1).
(4) As regards events of default, clause 10 provides, inter alia:
"10. Events of Default
Each of the events or circumstances set out in this Clause 10 is an Event of Default (save for Clause 10.10 (Acceleration)).
10.1 Non-Payment
The Borrower or LMA do not pay on the due date any amount payable pursuant to the Finance Documents unless:
10.1.1 its failure to pay is caused by administrative or technical error; and
10.1.2 payment is made within three Business Days of its due date.
10.2 Other Obligations
10.2.1 Any Obligor does not comply with any provision of the Finance Documents (other than, in respect of the Borrower, those referred to in Clause 10.1 (Non-Payment)).
10.2.2 No Event of Default under Clause 10.2.1 above will occur if the failure to comply is capable of remedy and is remedied within ten Business Days of the earlier of the Lender giving notice to the relevant Obligor or any Obligor becoming aware of the failure to comply.
10.5 Insolvency
10.5.1 Any Obligor is unable or admits inability to pay its debts as they fall due, suspends making payments on any of its debts, or by reason of actual or anticipated financial difficulties commences negotiations with one or more of its creditors with a view to rescheduling any of its indebtedness.
10.5.2 The value of the assets of the Borrower is less than its liabilities (taking into account contingent and prospective liabilities).
10.5.3 A moratorium is declared or imposed in respect of any indebtedness of an Obligor.
10.6 Insolvency Proceedings
Any corporate action, legal proceedings or other procedure or step is taken in relation to:
10.6.3 the appointment of a trustee in bankruptcy, a liquidator, receiver, administrative receiver, administrator, compulsory manager or other similar officer in respect of any Obligor or any of their assets;
10.10 Acceleration
On and at any time after the occurrence of an Event of Default which is continuing the Lender may:
10.10.1 by notice to the Borrower:
(a) declare that the Loans, together with accrued interest, and all other amounts accrued or outstanding under the Finance Document be immediately due and payable, whereupon they shall become immediately due and payable; and/or
(b) declare that the Loans be payable on demand, whereupon it shall immediately become payable on demand by the Lender; and/or
10.10.2 exercise any or all of its rights, remedies, powers or discretions under the Finance Documents, including enforcing the Security under the Share Charge."
MVL's Demands for Payment/Repayment
(1) A demand and exercise notice in respect of the Loan Notes, given that the Maturity Date had passed seeking repayment of £400,000 plus £105,477.26 accrued interest (£505,477.28) within 10 business days.
(2) A Formal Letter of Demand under the Loan Agreement pursuant to clause 10.10.1 which asserted that there had been an Event of Default under clause 10.2.1 in that in breach of clause 3 £755,062.99 drawn under the Facility had been used for purposes other than the payment of development and installation costs incurred by the Company in connection with the Galen Clinic. The letter demanded immediate repayment of all the outstanding balances of the Facility (£7.5 million) plus interest (£585,317.38), totalling £8,085,317.38. The letter relied on the alleged Event of Default to accelerate the repayment date.
The issuing of the Application and initial hearing
"Dear All,
I hope this message finds you well.
I am writing to update you on an important development regarding the future of the business.
As you may be aware, the company has been facing significant financial challenges. After careful consideration and discussions with the relevant shareholders, we have made the difficult decision to seek court approval for the appointment of an administrator. I understand that this news may cause concern, and I want to assure you that we are fully committed to securing the best possible outcome for all involved, including ensuring that staff will be paid and that your rights and entitlements are protected throughout this process.
A buyout, facilitated by the appointment of an administrator, is being pursued. This means that the company, under new ownership, will hopefully continue to operate with a reduced structure, which will help maintain the business's viability and ensure that employees' jobs are safeguarded.
We anticipate that this transition will be smooth, but we ask for your patience and cooperation as we move forward with this process. As part of the process, the staff will continue to be paid, and we are working closely with Mr Aziz Baig to ensure that all wages and outstanding entitlements are addressed promptly.
We understand the importance of your financial security, and we are taking every step to ensure that you are paid on time. We will keep you updated as the process unfolds. I recognise that these times can be stressful, and I want to assure you that I am fully committed to ensuring a positive outcome for you, the staff, and the business as a whole.
Thank you for your understanding, patience, and continued dedication during this period. If you have any immediate concerns or questions, please do not hesitate to reach out to HYPERLINK "mailto:info@marko-ventures.com"."
"OFFER LETTER FOR LONDON ANTIAGING CLINIC LTD
Dear Sirs,
We are the directors of Reborne Longevity Ltd, company no. 16123585 (RL Ltd), a company registered England and owned by holdco Reborne Ltd, company no: 16114495 which has the same UBO's as Marko Ventures Ltd, company no 13882559 (MARKO), the largest creditor of London Antiaging Clinic Ltd (LACL).
Following the application to court by MARKO to appoint an Administrator, we have been invited to make an offer for LACL.
We are pleased to put forward our offer herein in accordance with the following terms:
LIST OF ASSETS
The unencumbered tangible assets include, plant and equipment, office furniture and equipment, computer equipment, leasehold improvements, fixtures and fittings, inventory of consumables, forward order book as listed in ANNEX I.
RL Ltd is prepared to pay for the assets listed for which we have subscribed the purchase price below.
This offer includes the commitment by RL Ltd to take an assignment of the lease of the trading location at 9 Queen Anne Street, W1 with the Landlord Malborough Properties and the right to a novation of outstanding finance agreements in respect of all leased equipment and asset purchases.
PURCHASE PRICE
Our offer is for GBP 75,000 at closing plus an undertaking to include the following elements:
B. If this offer is accepted, MARKO will waive its unsecured claims for GBP 8,604,987.19 total as per breakdown listed below:
- GBP 8,098,673.54 due as MARKO Loan (GBP 7,500,000 loan amount plus GBP 598,673,54 interest accrued till 19/Dec/24)
- GBP 506,313.64 due as MARKO expired loan notes (GBP 400,000 loan amount plus GBP 106,313.64 interest accrued till 19/Dec/24)
C. We undertake to assume the liabilities for most of the LACL aged payables listed in ANNEX II for GBP 416,708.56
D. We will accept the liability for employees listed in ANNEX III to be transferred to RL Ltd
Looking forward to receiving your response to our formal offer above."
(1) Financial position of the Company: he explained that trade creditors amounted to £603,315.53 and the Company had failed and continued to fail to pay trade creditors when due. He referred to the liability of the Company to MVL under the Facility in the sum of £8,085,317.38 (being the accelerated sum due on the basis of the alleged Event of Default). He said it was evident that the company had been insolvent for months within the meaning of section 123 of the 1986 Act.
(2) Statutory Purpose of the Administration: he explained that he does not consider that it is possible to rescue the Company as a going concern. He stated that any administration would achieve the statutory purpose of achieving a better result for the Company's creditors as a whole than would be likely if the Company were wound up (without first being an administration).
(3) How the statutory purpose would be achieved. Mr Simmonds deals with this in the following terms:
"How statutory purpose of administration will be achieved
17. I have engaged Richard Birch of Richard Birch & Co, an independent agent and valuer accustomed to dealing with distressed and insolvent business sales. I did so with a view to assisting me in ascertaining whether a sale of the Company's business and assets might generate realisations for the benefit of the Company's creditors, should the Company enter into administration.
18. I exhibit at pages 65 and 66 of NCS1 a copy of a recommendation letter prepared by Richard Birch & Co, which states that:
18.1 Richard Birch & Co have been unable to inspect The Clinic, but it has had sight of the Company's current management accounts and list of tangible assets;
18.2 An advert was placed on HYPERLINK "http://www.ipbid.com" for the sale of the Company's business and assets;
18.3 13 expressions of interest were received and 13 non-disclosure agreements were issued;
18.4 Two non-disclosure agreements were returned; and
18.5 No offers for the Company's business and assets were received.
19. Separately, Reborne Longevity Ltd (company number: 16123585) ("Proposed Purchaser") has made an offer to purchase the Company's business and assets by way of a 'pre-pack sale' from the Company acting by administrators. A copy of the Proposed Purchaser's offer is exhibited at pages 67 to 74 of NCS1, which can be summarised as follows:
19.1 The Proposed Purchaser will pay £75,000 for the Company's business and assets;
19.2 The Proposed Purchaser will assume liability for the Company's trade creditors;
19.3 The Company's employees will be transferred to the Proposed Purchaser and the liabilities will be assumed by the Proposed Purchaser; and
19.4 The Applicant will waive, for dividend purposes only, its unsecured claims against the Company in the sum of £8,604,987.19.
20. A member of my staff, Pieris Lysandrou, also wrote to Dr Androulakakis (who is another director of the Company) on 18 December 2024. Dr Androulakakis was asked whether he had any interest in making an offer to purchase the Company's business and assets. A copy of this email is exhibited at pages 75 to 76 of NCS1. As at the date of this witness statement, no reply has been received from Dr Androulakakis and no offer has been made, however, we are aware that he has received that email as it was discussed in a telephone call between Mr Lysandrou and Linton Bloomberg of Reed Smith LLP (who have been instructed by Dr Androulakakis).
21. The recommendation letter prepared by Richard Birch & Co (pages 65 and 66 of NCS1) concludes that this offer should be accepted for the reasons set out in that letter.
22. In the event that I am appointed as one of the administrators, I expect to be able to immediately conclude a pre-pack sale of the Company's business and assets, which will have the effect of:
22.1 safeguarding the position of the Company's employees;
22.2 see an overall reduction in the Company's unsecured debts by approximately £9,021,695 as the Applicant will be waiving its claim for dividend purposes in the administration (and any subsequently liquidation) and also assuming liability for the Company's trade creditors.
23. As the Proposed Purchaser appears to be connected to the Company, I understand that an application to the 'pre-pack pool' is being made and a copy of the evaluator's report will be made available to the Court.
24. Based on the information which I have received from the Applicant, the valuation report from Richard Birch & Co and the Initial Offer, I have prepared an estimated comparative outcome statement which I exhibit at page 77 of NCS1. This statement compares the outcomes in administration and liquidation. As can be seen, from the estimated outcome statement, there is likely to be a better return for the Company's creditors, should the Company enter into administration rather than enter into liquidation first."
(1) Reborne agrees that it will:
(a) pay £195,000 on completion (increased from its previous offers of £75,000 and £150,000);
(b) purchase the Company's business and certain of its assets (likely to leave nothing of substantial value behind);
(c) take on all 22 employees and liabilities to them pursuant to the Transfer of Undertakings (Protection of Employment) Regulations 2006;
(d) take responsibility for the outgoings under the lease for the Galen Clinic's premises, pursuant to a licence to occupy, while negotiating an assignment of the existing lease or taking a new lease with the landlord;
(e) assume the Company's liabilities to those creditors listed in a schedule totalling £494,509.74 and to all trade creditors generally. This obligation is guaranteed by MVL who has demonstrated it has sufficient funds.
(2) MVL will waive its claim for £8,673,557.49 under the Loan Notes and the Loan Agreement for dividend purposes only. This has the effect that it will not be entitled to participate in any distribution to creditors in the administration or any liquidation. It allows it to vote or participate in any decision procedure or deemed consent procedure.
"I am the owner of Helios Hotels & Resorts ("Helios") which owns and operates a range of luxury hotels and spas throughout Greece.
I am aware that you have made an application for administrators to be appointed over the Company dated 12 December 2024, and a hearing is listed for this application for 9 January 2025.
I have discussed the current circumstances of the Company with Dr Andreas Androulakakis.
The purpose of this letter is to record the terms of an offer from Helios for the repayment of monies owned by the Company to MVL, the acquisition of MVL's shares in the Company, and Helios's proposed investment in the Company. If these terms are acceptable in principle, the proposal is that they would form part of a wider settlement between the parties, as part of which the application dated 12 December 2024 would be withdrawn.
The terms are as follows:
i. Helios will assume responsibility from LAC for the repayment of amounts allegedly due and payable under the Facility Agreement dated 12 June 2023 as amended. I understand the amount due on MVL's case is £8,085,317.38 (made up of principal and interest). Helios will agree to repayment on the following terms:
a. An initial payment of £1,085,317.38; and
b. A balancing payment of £7,000,000, payable in four equal annual instalments, with the first payment six months after the date on which the settlement agreement is executed.
ii. The personal guarantee in the name of Dr Androulakakis provided in relation to MVL's loan to LAC referred to above, shall be discharged and Dr Androulakakis released from his obligations under it.
iii. Helios will pay all amounts alleged to be outstanding to MVL under the relevant convertible loan notes, which I understand on MVL's case to be £505,477.26.
iv. A third-party investor, introduced by Helios, will, subject to due diligence, acquire the shares of MVL in the Company for a price of £6.5 million.
v. Of the sums outstanding to third party creditors, Helios will agree to pay 40% should MVL agree to pay 60% with the amounts paid by MVL under this term to be added to the loan balance to be repaid over four annual instalments pursuant to i. above.
vi. Helios will agree to provide sufficient working capital for the Company to trade at least for the first quarter of 2025, and any other additional amounts necessary for trading in that period.
vii. Following the completion of the agreements envisaged by these terms, the Company will manage from April 2025 a medical spa located at Elounda Beach and Elounda Bay Palace, and from summer 2026, a medical spa at Grand Resort Lagonissi. The Company will receive a management fee of 15% of gross sales generated by these spas, providing a significant increase in income for the Company.
As the heading of this letter makes clear, the terms in this letter are put forward on a strictly subject to contract and non-binding basis.
Please therefore confirm whether these terms are agreed in principle by midday (UK) tomorrow, 8 January 2025 and then a heads of terms for the above and the wider terms of settlement should be drawn up and signed by all parties on an urgent basis. Arrangements would also need to be made to have the hearing on 9 January adjourned. The parties can then move forward with any necessary due diligence and documenting the terms in binding agreements as soon as possible.
Dr Androulakakis countersigns the letter below, to confirm he is aware of and endorses the approach made by Helios in this matter."
(1) All the terms of the Reborne Proposal are now reduced to writing and more money is offered for the Company's business.
(2) Quantum placed an advertisement on IP-BID.com on 23 January 2025 and this will remain live until the sale of the Company's business has been completed. Thus any offers for the Business will be considered by Quantum after any administration order has been made. This is consistent with the duties of an administrator.
(3) Richard Birch & Co marketed the Company's business and assets on their database of potentially interested parties. The firm explored with Dr Androulakakis and LMA whether they were willing and able to make an offer to purchase the business and assets of the company. The steps taken and the recommendations of the firm are set out in the firm's letter dated 10 February 2025. The letter concludes that Reborne's increased offer of £195,000 and the steps taken only reinforces its opinion that if no better offer is received then the offer from Reborne is the best possible outcome for unsecured creditors and should be accepted.
(4) A draft Statement of Insolvency Practice 16 ("SIP 16") has been prepared, which appears to cover the essential elements required for a pre-pack sale. This is particularly important in the context of a pre-pack sale in the current circumstances, where the beneficial owners of the purchaser and MVL, the applicant for the administration order and shareholder in the Company, overlap.
Principles on an Administration Application
53. "Further, in my judgment, a person is a "creditor" within paragraph 12(1)(c) Schedule B1 so long as he has a good arguable case that debt of sufficient amount is owing to him (to adopt the words of Lord Denning in Claybridge Shipping). Thus, even in the case of a disputed debt, such a person may make an application for an administration order. It is then a matter for the discretion of the court whether actually to make an administration order. The court has jurisdiction to deal with the application without having to resolve the dispute about the debt."
"3(1) The administrator of a company must perform his functions with the objectives of rescuing the company as a going concern, or achieving a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration),or
realising property in order to make a distribution to one or more secured or preferential creditors
(3) The administrator must perform his functions with the objective specified in sub-paragraph (1)(a) unless he thinks either -
that it not reasonably practicable to achieve that objective , or
that the objective specified in sub-paragraph (1)(b) would achieve a better result for the company as a whole.
."
"11. The court may make an administration order in relation to a company only if satisfied
(a) that the company is or is likely to become unable to pay its debts, and
(b) that the administration order is reasonably likely to achieve the purpose of administration."
"54. The court can only make an administration order if it is satisfied, in accordance with paragraph 11 Schedule B1, that the company is or is likely to become unable to pay its debts for which purpose it is necessary to refer back to section 123. It does not necessarily follow from the fact that an applicant for an administration order whose debt is disputed is a creditor for the purposes of locus standi to make an application that he is a creditor for the purposes of section 123(1)(a) or that the amount of his alleged debt is a debt or liability for the purposes of sections 123(1)(e) or (2). The point here is that the mere fact that, on the evidence before it, the court is satisfied that a petitioner has a claim which is sufficient to give him the status of a creditor for the purposes of locus standi does not necessarily mean that that same evidence is sufficient to persuade the court that his purported debt should be taken into account in assessing solvency for the purposes of section 123."
"38. In my judgement, the effect of the authorities I have cited is that there is standing to apply for the making of an administration order as a creditor even where a debt is disputed; the court has the jurisdiction to deal with the application without having to resolve the dispute about the debt. It is then a matter for the discretion of the court whether actually to make an administration order. In a case such as the present, however, where the alleged debt which is said to give the Applicant the necessary standing to apply for an administration order is also relied upon as evidence of insolvency sufficient to satisfy the condition in paragraph 11(a) of Schedule B1 that the company is, or is likely to become, unable to pay its debts, it seems to me clear that the debt must be proved on the balance of probabilities. That is because in such a case, unless the debt is proved on a balance of probabilities, the Applicant has not shown that the company is, or is likely to become, unable to pay its debts in the sense required by the Insolvency Act."
"24. It is necessary first in my judgment to understand that the discretion provided to the court in para.13 of Sch.B1 is of a wide and general nature. It is not constrained in any way. Any appellate court considering a particular exercise of such a discretion must ensure that nothing it says operates so as to cut down the width of the statutory discretion that parliament has given to the court. The effect of this proposition is that a multitude of factors may properly be taken into account in deciding in any particular case whether it is appropriate to make an administration order when the two statutory preconditions have been held to be fulfilled. Nothing that I say today should be taken as limiting the factors that can properly be considered. The circumstances are likely to be infinitely variable. The interests of secured creditors, preferential creditors, unsecured creditors and the company itself will change from case to case."
The Issues
(1) Does MVL have standing to apply for an administration order? Within this issue the sub-issues are:
(a) Is MVL a creditor in the Company and if so, in respect of what matters and amounts?
(b) Is MVL precluded from bringing the Application by virtue of the express and implied terms of the SHA?
(2) Is the paragraph 11(a) condition satisfied, namely that the Company is or is likely to become unable to pay its debts?
(3) Is the paragraph 11(b) condition satisfied, namely the administration order is reasonably likely to achieve the purpose of the administration, the purpose relied on here is the second objective in paragraph 3(1)(b) of achieving a better result for the Company's creditors as a whole than would be likely if the Company were wound up (without first being in administration)?
(4) Should the Court in its discretion make the administration order sought?
Issue (1): MVL's standing
(1) The Shareholders agreed that they would procure that the Company would not pass any resolution to petition for its winding up or administration, unless both MVL and LMA consented (clause 5.1.12);
(2) The Shareholders had undertaken that they would promote the Company's best interests (clause 5.2.1); and
(3) Whilst the Company's insolvency would generally mean the termination of the SHA, it was agreed that the Company's inability to repay loans or other sums outstanding to a shareholder would not terminate the SHA (clause 15.2.1).
Issue (2): Is the paragraph 11(a) condition satisfied
Issue (3): Is the paragraph 11(b) condition satisfied
(1) trade creditors of at least £494,000;
(2) Mr Schuster under his loan notes (approximately £700,000);
(3) MVL under the Loan Notes (approximately £505,000 with interest up to end 2024);
(4) MVL's lending under the Loan Agreement (in excess of £8 million inclusive of interest) albeit the formal demand based on an alleged Event of Default is in dispute.
Issue (4): Discretion
Conclusion