English Court confirms that a director cannot appoint an administrator without a valid board resolution

Quick read

The English High Court clarified that a director acting without the approval of the majority of the board cannot make an application to appoint administrators.

Background

One of the two directors of LYHFL Limited made an application to the court for an administration order without seeking the approval of the other director or passing a valid board resolution. The relationship between the directors was acrimonious. The other director challenged the application on the grounds that the company was not insolvent and that the director who brought the application lacked standing.

Decision

The court held that a single director of a company that has two directors has no power to apply to the court for an administration order without the approval of the majority of the directors and without a valid board resolution. The judge distinguished the previous decisions relied on by the applicant director as both cases concerned applications by sole directors for administration orders.

Key takeaways

In practice, this means that unless the majority agree there will be no ability on the part of the directors to bring an administration application.
The court noted that in a case like this, if one director has standing to apply to court for an administration order and the other director opposes the application, there would be the potential for each side to use this as a further weapon in their dispute.