When a NOITA should be used

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When a NOITA should be used

When a NOITA should be used

Notice of Intention to Appoint an Administrator (NOITA) are used too often. The recent judgment on the case below highlights why businesses and Insolvency practitioners should be careful when filing a NOITA.

The recently released judgment in the case of JCAM Commercial Real Estate Property XV Ltd v Davis Haulage Ltd ([2017] EWCA Civ 267, [2017] All ER (D) 62 (Apr)) rejects the practice of filing NOITA while seeking a Company Voluntary Arrangement (CVA).

Although the above case involves the consideration of a CVA as the reason for filing the NOITA, the narrative of the Judgment offers useful clarity on when a NOITA should be used. The purpose of filing a NOITA is both limited and specific i.e. where there is an intention to appoint an administrator. It should also only be used if there is a person with a prior right of appointment. The purpose of the interim moratorium is to protect the company and its assets while the person with a prior right decides whether to appoint. Thus where there are no QFCs (Qualified Floating Charge) for example the company should not use a NOITA and should instead proceed to immediately appoint an administrator.

Further the judgment commented that if the scheme of the legislation envisaged that an appointment by the company or its directors might well not follow, in the absence of an appointment by a QFC, it is difficult to discern the real purpose of the interim moratorium. If there is no person to whom notice has to be given under para 26(1) of sch B1 of the Insolvency Act 1986, there can be no interim moratorium.

The narrative to this appeal decision should be carefully considered when advising whether it is appropriate to file a Notice of Intention.

Should you have any questions or require any assistance in relation to matters such as this or similar please contact Damon Watt or Katie George.