In the recent case of Cash Generator Limited v Fortune and others  EWHC 674 (Ch), the Court determined that non-compliance with the deemed consent procedure for nominating liquidators did not invalidate their appointment. The case provides a useful summary on the relatively new provisions governing the deemed consent procedure and welcome relief to Insolvency Practitioners (“IPs”) that a failure to fully comply with such provisions will not necessarily invalidate their appointment.
Brief facts and arguments
Three companies (which were franchisees of the applicant) (the “Companies”) entered Creditors Voluntary Liquidation. Pursuant to the franchise agreements in place, should a franchise cease to carry on business, or a meeting be convened for a voluntary winding up, the applicant could terminate the agreements and require the Companies to give up possession of their premises and transfer their assets to the applicant. Six days before their liquidation the Companies assigned the leases to their business premises and the Liquidators sold the assets of the Companies two days later.
The applicant applied for the reversal of the nominations of the joint liquidators (the “Liquidators”) of three companies (the “Companies”) and/or the Liquidators’ removal from office and the appointment of others in their place.
The basis for the application was that the deemed consent procedure had not been carried out as the notices required to be sent to all creditors were not sent to the applicant, employees or the landlords. The applicant also requested that the Liquidators be replaced because investigations were required into the assignment of the leases and the sale of the assets and the Liquidators were either conflicted, otherwise too closely involved or did not wish to carry out the investigations.