Administrators’ Responsibility to assess the validity of their Appointment
An administrator will be properly appointed under section 436A of the Act when the following are satisfied:
In Re Condor Blanco Mines Ltd  NSWSC 1196 the appointment of the administrator of Condor Blanco Mines Ltd (Company) under section 5.3A of the Corporations Act 2001 (Cth) (Act) was successfully challenged on the basis that, at the time of appointment the board of the Company did not genuinely hold the belief that the Company was insolvent or about to become insolvent.
The Company sought that the administrator not be indemnified by the Company’s assets and instead be required to pay costs on the basis that he did not act in the way that a reasonable administrator should.
The Court made the following points regarding an administrator’s responsibility to assess the validity of his or her appointment:
If administrators commence proceedings under sections 442A, 446C or 446D of the Act, a question may be raised with respect to their personal interest in retaining their paid office.
Administrators are not required to undertake independent verification of the factual basis of their appointment; they are however required to make enquiries with respect to the financial status of the company when put on notice that there may be ulterior motives beyond impending insolvency. If concerned, Administrators may test the validly of their appointment in sections 442A, 446C and 446D of the Act. Such actions are however discretionary and may raise concerns with respect to the Administrator’s self interest in retaining their paid office.
If you have questions about voluntary administration, please contact Stipe Vuleta of our office on 02 6215 9100 for a complimentary discussion.