Improper purpose can invalidate an administrator appointment

An out-of-court appointment of administrators can be ineffective where the security holder appoints them solely for an improper purpose.Nationalarchives The Court of Appeal allowed Glint Pay’s appeal on 31 July 2026, restoring its opportunity to challenge appointments allegedly used to acquire its business rather than recover the secured debtNationalarchives. Glint must establish that subjective improper purpose at trial.

Niven acquired Glint’s loan and security after an unsuccessful approach to buy a controlling shareholding. It later accelerated the loan following Glint’s refusal to supply financial information and appointed administrators in September 2019. Glint refinanced and repaid the loan shortly afterwards. The companies subsequently sought compensation or damages from the administrators on the basis that their appointments had been invalid.

The court held that Glint had a realistic prospect of proving that Niven’s sole subjective purpose was to acquire its business and assets. The administrators’ independent duties did not make that alleged purpose proper. The judgment distinguishes these unusual allegations concerning a company solvent before acceleration from a typical loan-to-own strategy used by creditors of an insolvent company to maximise recovery. Where enforcement genuinely pursues repayment, an additional collateral purpose does not by itself invalidate it.Nationalarchives

The court also rejected the argument that the creditor remedy in paragraph 81 of Schedule B1 prevented a company challenging an appointment as ineffective from the outset.Nationalarchives That provision allows a creditor alleging improper motive to seek an order ending the appointment and gives the court a range of possible responses.

Glint nevertheless lost its argument that the lender’s information requests fell outside the debenture. The requests concerned the operation and condition of the companies’ undertaking: they sought cash balances, trade creditors and intercompany lending information. Earlier month-end figures could illuminate its current condition. Failure to respond therefore constituted an event of default.Nationalarchives However, the information-request power was subject to an implied limit: it must serve the legitimate commercial aims of the security holder in that capacityNationalarchives. Glint’s alternative case on improper use of that power may proceed to trial.

The companies’ agreement to arrangements for ending the administrations and paying remuneration did not justify disposing of their challenge summarilyNationalarchives. Whether Glint reserved its position on appointment validity is a triable issue.Nationalarchives The court considered a pay-now-and-litigate-later approach reasonable; factual questions concerning estoppel require trial. The appeal therefore restores the claim without finally deciding the validity of the appointments or liability for damages.Nationalarchives

The legal basis is the Insolvency Act 1986, Schedule B1, particularly paragraphs 14 and 81, and the equitable limits on security enforcementNationalarchives applied in Glint Pay Ltd & Ors v Jason Daniel Baker & Anor [2026] EWCA Civ 1023Nationalarchives.