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In the recent case of Boura v Lyhfl Ltd  EWHC 2585 (Ch), it was held that one of two directors of a company has no standing to make an application to the court for the appointment of an administrator where there is no valid resolution of the board in favour of the application and/or where there is no clear majority.
Ms Abigail Boura (the ‘Applicant’), a director and shareholder of LYHFL Limited (the ‘Company’) brought an application to the court to appoint an administrator for the Company. The application was opposed by the only other director and shareholder, Mr Leigh Harmer (the ‘Respondent’), who argued that one of the two directors lacked the authority to request an administrator.
The dispute between the Applicant and the Respondent escalated following the end of their personal relationship. Both parties accused the other of breaching their fiduciary duties as director. The Applicant claimed the Company was already insolvent or likely to become so. On the other hand, the Respondent countered this claim, alleging the Applicant was trying to engineer a quasi-pre-pack arrangement without board approval.
Paragraph 12(1) of Schedule B1 of the Insolvency Act 1986 stipulates that an application for an administration order can only be made by the company itself or its directors. The Respondent argued that “the directors” in paragraph 12(1)(b) of Schedule B1 implies all or a majority of the directors acting in accordance with a valid board resolution. He contended that the term “only” emphasised that the court could not entertain such an application unless it originated from individuals fitting the categories in paragraph 12(1) of Schedule B1.
The Court considered relevant case law, including Re Equiticorp International plc  1 WLR 1010, which clarified that “the directors” did not necessitate unanimous agreement among directors but required a majority resolution from a properly convened board meeting. The Court also considered Minmar (929) Ltd v Khalastchi  BCC 485, emphasizing the need for a decision by all or a majority of the board members during a properly arranged board meeting.
The Court reviewed the decisions cited by the Applicant and suggested that this circumstance might be distinguishable, especially when dealing with a sole director who violates the quorum provision in the company’s articles. Even if these decisions were not distinguishable, the Court concluded that this case warranted an exception to those precedents.
The Court determined that, without the majority approval of the directors and a valid board resolution, one of the two directors lacked the authority to apply to the court under paragraph 12(1) of Schedule B1 for the appointment of an administrator.
If you have any questions related to any of the issues raised in this article, please get in touch with our Insolvency & Business Restructuring team.
This article has been produced for general information purposes and further advice should be sought from a professional advisor.