What Are the Duties of Wilko's Administrators?

With the recent reports and discussions regarding the administration of Wilko, we look in this article at the duties of an administrator as set out in statute and case law.

What Is Administration?

Administration is an alternative to liquidation which seeks to – where possible – save the business from closure.

Statutory Purpose of Administration

There are three statutory objectives of administration, as set out in Paragraph 3(1) Schedule B1 Insolvency Act 1986:

Rescue the company as a going concern
Achieving a better result for the company’s creditors than a liquidation
Sell assets in order to repay one or more secured or preferential creditors

An administrator will consider what objective can best be achieved based on the circumstances of the Company, and ultimately whether it should continue to trade or close immediately.

Duties of an Administrator

As officeholders, administrators will have a duty to the creditors of the Company to act in their best interest as a whole. The effect is that the rights of one body of creditors – whether it be secured, unsecured or employees – should not overtake the others

If however objective 3 above is being pursued, the interest of the secured creditors may be placed higher, provided that “unnecessary harm” to other classes of creditors is avoided.

Practical Applications of Administrator's Duties

Whilst generally it would be in the best interests of the creditors when realising assets to sell them for the highest price possible, recent reported case law regarding administrator’s duties has provided the following commentary:

“It is to be observed that it is not an absolute duty to obtain the best price that circumstances permit but only to take reasonable care to do so; and that in my judgment means the best price that circumstances as he reasonably perceives them to be permit” ¹.

Administrators should, when dealing with Company assets, engage suitable agents and advisors to assist them in fulfilling their statutory duties. Following their advice can be key to ensuring that, not only do they undertake their appointment diligently, but they avoid subsequent complaints from creditors and alike.

Challenges to Administrator's Actions

Ultimately, any complaints regarding administrator conduct may only be conducted through the court.

However, these complaints don’t have a very successful track record. Judges are unlikely to intervene and overturn the decisions made by an officeholder unless “he has done something so utterly unreasonable and absurd that no reasonable man would have done it”²

^{1 Re Charnley Davies (No. 2) [1990] BCLC 760}

^{2 Edennote Ltd, Re [1996] EWCA Civ 1349}