When administration loses its purpose: High Court orders winding up after creditor rejection

Author: Rachel McCulloch

Key Contact: Jared Ursell

A recent High Court decision has provided a clear reminder that administration must serve a genuine statutory purpose and that where it does not, the court will not hesitate to bring it to an end.

Acuity Law’s Commercial Litigation team acted for a group of 26 unconnected judgment creditors (the Interested Parties) in proceedings concerning whether Kession Capital Limited should remain in administration following the rejection of the administrators’ proposals.

Background

Kession Capital Limited entered administration in April 2025, shortly after the Supreme Court lifted a stay on enforcement of one of the Interested Parties’ judgments. That judgment then became enforceable, prompting the appointment of administrators.

The administrators selected the objective under paragraph 3(1)(c) of Schedule B1 to the Insolvency Act 1986, namely, to realise property in order to make a distribution to a preferential creditor. This approach was based on a preferential wage claim of approximately £800 advanced by Mr Kessler, the Company’s sole director and majority shareholder.

The administrators’ proposals were subsequently reaffirmed without material amendment.

Creditor concerns and voting irregularities

Significant concerns arose in relation to the conduct of the administration process, particularly the treatment of creditor claims for voting purposes.

The administrators initially valued the Interested Parties’ adjudicated judgment debts at £1 each. This position was later accepted to be incorrect. In contrast, claims submitted by connected creditors were admitted at face value without sufficient scrutiny.

In addition, the administrators failed to properly apply rule 15.34(2) of the Insolvency (England and Wales) Rules 2016, which prevents connected creditors from passing certain decisions where a majority of unconnected creditors are opposed to the resolution. This issue was only addressed following intervention by the Interested Parties’ insolvency practitioner.

The court found that these errors materially undermined confidence in the administration process.

The application and the court’s decision

Following the rejection of the administrators’ proposals under paragraph 49(1) of Schedule B1, the administrators sought directions from the court to effectively “hold the ring” pending the outcome of the Company’s appeal to the Supreme Court.

The Interested Parties opposed this application.

At a hearing on 03 March 2026, the court determined that there was no rational basis for the Company to remain in administration. In particular:

• The asserted justification of preserving FCA authorisation was unsupported by evidence
• The suggestion of a potential refinancing was speculative and unsubstantiated
• Both points were inconsistent with the administrators’ stated objective under paragraph 3(1)(c)

The court concluded that the administration no longer served a valid statutory purpose.

Outcome

The judge ordered that the Company be compulsorily wound up under paragraph 55(2)(e) of Schedule B1 to the Insolvency Act 1986.

Huw Powell and Paul Wood of Begbies Traynor (Central) LLP were appointed as joint liquidators pursuant to section 108(2) of the Insolvency Act 1986.

In a further notable development, the administrators agreed by consent to waive recovery of their fees and associated legal disbursements from the estate and to contribute towards the Interested Parties’ costs.

Key takeaways

This judgment reinforces several important principles for insolvency practitioners and creditors alike:

• Administration must be grounded in a clear and evidence-based statutory purpose
• Voting processes must be conducted with accuracy and fairness, particularly where connected parties are involved
• The court will intervene where procedural errors undermine creditor confidence
• Speculative or unsupported justifications will not sustain an administration

For creditors, the case highlights the importance of active engagement and, where necessary, robust challenge to ensure that insolvency processes are conducted properly and in accordance with the statutory framework.

Acuity acting for the interested parties

The Interested Parties were represented by Acuity Law’s Commercial Litigation team, with Samuel Parsons of Erskine Chambers instructed as counsel.