| INSOLVENCY— Administration order — Distribution of assets — Floating charges — Company’s net property — Share of prescribed part for unsecured creditors — Whether floating and fixed charge holders excluded from participating in “prescribed part” in respect of their unsecured claims — Insolvency Act 1986, s 176A (as inserted by Enterprise Act 2002, s 252)
In re Airbase (UK) Ltd; In re Airbase International Services Ltd [2008] EWHC 124 (Ch); [2008] WLR (D) 30
Ch D: Patten J: 5 February 2008
The provisions of s 176A of the Insolvency Act 1986, which dealt with floating charges relating to property of a company that was, inter alia, in administration, excluded from participation in any distribution from the “prescribed part” of a company’s net property, as defined in s 176A(6) of the Act, secured creditors who had unsecured debts due to a shortfall in the value of their security.
Patten J so held in the Chancery Division on an application for a declaration by David Thorniley and Peter Forsey, the joint administrators of Airbase (UK) Ltd and Airbase International Services Ltd, as to whether the second respondent, Harris NA, the holder of fixed and floating charges over assets of the companies, was entitled to participate in the prescribed parts of the companies’ net property.
The companies went into administration and, following the completion of any realisations that were achievable and the calculation, pursuant to the Insolvency Act 1986 (Prescribed Part) Order 2003 (SI 2003/2097), of the prescribed part of the companies’ net property available for the satisfaction of unsecured creditors, pursuant to s 176A of the Act, it became apparent that there would be a deficiency in the second respondent’s fixed and floating charge securities. The issue that fell to be determined on an application for directions was whether the prescribed parts of the companies’ net property were available to satisfy any part of the debts due to the second respondent which were secured by a floating charge in their favour but could not be paid out of the realisation of the net property due to a shortfall in the value of the security.
PATTEN J said that the phrase “unsecured debts” in s 176A(2)(a) and (b) had to have the same meaning. S 176A(2)(b) dealt with the case where the prescribed part of a company’s net property as defined in s 176A(6) exceeded the amount required to discharge the unsecured debts in full and left a surplus. In those cases the embargo on distributing the prescribed part to a floating charge holder was removed and the surplus reverted to its original purpose of being available to satisfy the claims of floating charge holders. For s 176A(2)(b) to have any possible application “unsecured debts” could not include the unsecured debts of any type of secured creditor as defined. Accordingly, a floating charge holder and a fixed charge holder were excluded from participating simply because of the provisions of s 176A(2)(a) and not by virtue of the express restriction on distributions to a floating charge holder contained in s 176A(2)(b). The “prescribed part” was held for the benefit of unsecured creditors alone and both floating and fixed charge holders were excluded in respect of their unsecured claims.
|
