Kings Chambers commercial and insolvency barrister Jonathan Fletcher-Wright has successfully obtained orders indefinitely staying the creditors’ voluntary liquidations of two companies, thus returning them to the control of their director, in an unusual and challenging situation.
This report is published with client permission. Names and identifying details have been changed for reasons of commercial sensitivity.
The director controlled two companies (“Company X” and “Company Y”) which had been managing debts for some time. After taking professional debt advice, he placed both companies into creditors’ voluntary liquidation.
The director had limited knowledge of insolvency law and took the advice he was given at face value. Unfortunately, that advice did not appear to take account of his wider business position. In particular, the director also controlled a profitable company (“Company Z”), which was in the middle of negotiating a significant transaction. The liquidation of Companies X and Y had an immediate and adverse effect on Company Z’s creditworthiness, putting it at risk of losing its finance facility. Had the director been advised of that consequence, he would not have placed Companies X and Y into liquidation and could instead have managed their debts.
Kings Chambers’ Jonathan Fletcher-Wright, instructed by Anthony Wagner and Sophie Ashworth of W Legal Solicitors, was asked to advise on whether the liquidations could be undone or brought to an end.
The applications were procedurally unusual. There is no simple mechanism for “undoing” a creditors’ voluntary liquidation. A compulsory winding up order may be set aside or rescinded, including under rule 12.59 of the Insolvency (England and Wales) Rules 2016, but that route is not available where there is no winding up order to revoke. The closest available remedy was an application under sections 112 and 147 of the Insolvency Act 1986 for an order staying the liquidations indefinitely. Such an order has the practical effect of returning a company to ordinary trading: Re Lowston Ltd [1991] BCLC 570 at 572.
The relevant case law, particularly on section 147, is limited and not gathered in a single modern authority. The applicable principles are scattered across a series of decisions over many years. Jonathan undertook a comprehensive review of those cases (including the earlier Kings Chambers case of Thomas v Parkwood Holdings Ltd [2023] EWHC 1571 (Ch), in which Louis Doyle KC appeared), in order to identify the principles governing the exercise of the court’s discretion, and the evidence required to satisfy a judge that a stay was appropriate.
Informed by that analysis, Jonathan worked with W Legal and the director to identify evidence addressing the key issues likely to matter to the court, including the director’s good faith, the absence of impropriety, his reliance on external professional advice, and the steps he proposed to take in order to avoid any prejudice to creditors or interested parties.
Jonathan represented the director in the High Court (Business and Property Courts at Manchester), and successfully obtained orders staying the liquidations of Companies X and Y indefinitely, helping the director to achieve his commercial objectives for Company Z.
Note: Jonathan accepts instructions in insolvency cases and general commercial litigation of all kinds, and also has a specialism in conflict of laws and disputes with a cross-border element. For availability enquiries, please contact his clerks Brandon Singh on [email protected] or Louie Morrissey on [email protected]
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