Directors have residuary powers

Closegate Hotel Development (Durham) Ltd and another v McLean and others [2013] EWHC 3237 (Ch), [2013] All ER (D) 308 (Oct); NLJ 8 November

On the true construction of Sch B1 of the Insolvency Act 1986, and applying settled law, the concept of “management power” was primarily intended to catch powers which, if exercised by the directors, could impede the exercise of similar powers by the administrators. Paragraph 64 of Sch B1 of the Act was not intended to catch a power on the part of the directors to cause the company to make an application challenging the logically prior question of whether the administrators had any powers to exercise at all. It was settled law that, even after the appointment of a provisional liquidators, the board of directors of a company retained a residuary power to instruct lawyers to challenge the appointment of the provisional liquidator, to oppose the petition and, if a winding up order was made, to appeal against the making of that order. Neither of the cases were authority for the proposition that the directors of a company lacked authority to cause a company to commence proceedings against a third party after the appointment of a receiver, or that the existence of such authority was conditional upon an indemnity for costs being provided. Similar considerations applied in the case of an administration.