The judgement of Hodge Malek KC, sitting as a deputy High Court judge, in Marko Ventures Ltd v London Antiaging Clinic Ltd [2025] EWHC 340 (Ch) deals with a contested application for an administration order under para 12(1)(c) Sch B1 Insolvency Act 1986. The order appointing joint administrators was sought in respect of London Antiaging Clinic Ltd by Marko Ventures Ltd, the majority shareholder in and principal funder of the company, which runs a health, beauty and wellbeing clinic in London. On 10 June 2024 a company called London Med Aesthetics Ltd, Marko, and a director and indirect shareholder, Dr Androulakakis, entered into a shareholders’ agreement.
The decision illustrates in particular the high level of scrutiny that the court will apply when exercising its discretion whether to make an administration order, where a pre-packaged sale will be completed forthwith thereafter and especially where the purchaser is a connected party (in this case, the applicant itself).
The following issues fell to be decided by the court:
(1) Did Marko have standing to apply for an administration order? In particular, was it a creditor of the company, and if so, in respect of what and in what amounts; and was it precluded from applying for administration by virtue of express or implied terms of the shareholders’ agreement?
(2) Was the condition set out in para 11(a) Sch B1 Insolvency Act satisfied, namely that the company was or was likely to become unable to pay its debts?
(3) Was the condition set out in para 11(b) satisfied, namely that an administration order was reasonably likely to achieve the purpose of the administration?
(4) Should the court in its discretion make the administration order sought?
The issue of Marko’s standing was disposed of quite quickly. The judge established with little difficulty that it was a substantial creditor on the basis that various loan notes had matured, demand had been made for their payment, and the sums due had not been paid. An alternative attack on Marko’s standing rested on the interpretation of terms in the shareholders’ agreement. The main argument (relying on the principles set out in Marks and Spencer plc v BNP Paribas Securities Services Trust Company (Jersey) Ltd) was that the agreement contained an implied term that the shareholders would not put the company into administration based on a debt owing or allegedly owing to them by the company: such a term, it was submitted, was the parties’ obvious but unexpressed intention, or was otherwise necessary to give business efficacy to the shareholders’ agreement.
That argument was rejected:
“I do not see any basis for implying such an implied term in a professionally drafted agreement between the parties with an entire agreement clause […]. Had the parties intended that a shareholder was to be restricted in its own ability to apply for an administration order then that would and should have been expressly set out. It is possible to give business efficacy to the SHA without it. It is unlikely that MVL as the prime funder for the Company’s business would have limited its ability to take such steps against the Company in circumstances where the Company was itself insolvent and the relationship between the shareholders had broken down.”
Having found that, the deputy judge went on to accept that paragraph 11(a) was satisfied: it was evident that the company was unable or was likely to become unable to pay its debts: it has been dependent on continued funding from Marko to carry on business and to pay its creditors; it had been operating at a substantial loss every month; it owed Marko approximately £505,000; there were debts to other creditors too; and the company was balance sheet insolvent with a deficit of £2,699,014.
The paragraph 11(b) condition was also found to be satisfied. The purpose relied on by the applicant was the second objective in para 3(1)(b), achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up without first being in administration. The deputy judge accepted that what was proposed in the administration represented a better outcome for creditors as a whole than going straight into liquidation.
He had more to say about that in relation to the fourth issue, the exercise of the court’s discretion. As he remarked,
“Even where the conditions for an administration order are satisfied, the court has a discretion as to whether or not to grant an administration order. The granting of an administration order is a serious matter where even if it is unopposed it will require close scrutiny by the court. In such circumstances the court expects applicants to provide a full and frank presentation of the facts and where appropriate the law. The present application required particularly careful scrutiny in that it was against the backdrop of a shareholder dispute and what was being sought was an outcome where the business would end up via a pre-pack sale in the hands of a new company set up by the beneficial owners of MVL, which is both the creditor seeking the administration order and the majority shareholder in the Company.”
In the context of discretion, the judge went on to address the problem of pre-pack sales which, he said, “have a particular risk of abuse and in disadvantaging creditors as recognised by the authorities” (he mentioned Re Kayley Vending Ltd and Re Moss Groundworks Ltd). The application had come before him in January. At that stage he had not been satisfied that there had been a proper marketing exercise: “It had been done in too much of a rush and little information was provided.” He said that an appropriate amount of time should have been devoted to marketing so that the administrators could be satisfied that the best outcome for creditors as a whole might be achieved. He accepted, however, that since January a proper marketing exercise had been carried out and the options properly explored, even if the result was not perfect:
“It is appreciated that there are persons who are losing out in relation to the Company, whilst [the potential purchaser] ends up with the business which it and MVL and their shareholders believe is a good business which may well thrive and be one that is ultimately profitable. [Mr S, an investor] will probably lose most of his investment. LMA and Mr Androulakakis also lose out as LMA’s shareholding in the Company becomes valueless,” he noted. But:
“There are distinct benefits of the administration order and the [purchase proposal]. Trade creditors should get paid in full. The 22 employees will remain employed at the…Clinic. The… Clinic will continue to provide services to its clientele and the public. Mr [S] will at least get £50,000 of his investment back. This is not at all a likely outcome if the Company were to go straight into liquidation.” So, “Balancing the various factors set out above, I have no doubt that an administration order is appropriate in all the circumstances.”
The judgment also records that, since the first hearing, a positive evaluator’s report had been obtained and put in evidence (per the Administration (Restriction on Disposal to Connected Parties) Regulations 2021, given the purchaser was connected).
Much of what the judgment covers is case-specific. Paragraphs 32-40, however, contain a useful review of the principles governing administration applications, and the section of the judgment dealing with the exercise of the court’s discretion whether to make or refuse an administration order makes clear that considered and proper marketing of any assets to be sold is likely to be required even where (if not, especially where) a pre-pack sale is contemplated. That proposition, of course, holds good for any sale, and applies equally where administrators are appointed out of court.