NGI Systems & Solutions Ltd v The Good Box Company Labs Ltd ((in Administration))
| Jurisdiction | England & Wales |
| Judge | Davis-White |
| Judgment Date | 14 February 2023 |
| Neutral Citation | [2023] EWHC 274 (Ch) |
| Court | Chancery Division |
| Docket Number | Case No: CR-2022-LDS-000923 |
[2023] EWHC 274 (Ch)
HH JUDGE Davis-white KC
(SITTING AS A JUDGE OF THE CHANCERY DIVISION)
Case No: CR-2022-LDS-000923
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS IN LEEDS
INSOLVENCY AND COMPANIES LIST (ChD)
Leeds Combined Court Centre
1, Oxford Row, Leeds LS1 3BY
IN THE MATTER OF THE GOOD BOX CO LABS LIMITED (In administration)
AND
IN THE MATTER OF THE COMPANIES ACT 2006
Mr Matthew Maddison (instructed by Walker Morris LLP) for the Claimant
Mr Neil Berragan (instructed by Carrick Read Leeds) for the join administrators of the Defendant
Hearing dates: 16 January 2023
Approved Judgment
I direct that pursuant to CPR PD 39A para 6.1 no official shorthand note shall be taken of this Judgment and that copies of this version as handed down may be treated as authentic.
HH JUDGE Davis-White KC (SITTING AS A JUDGE OF THE CHANCERY DIVISION)
This judgment was handed down by the Judge remotely by circulation to the parties' representatives by email and release to The National Archives. The date and time for hand-down is deemed to be 10:30am on 14 February 2023
HH Judge Davis-White KC:
On 16 January 2023 I made an order sanctioning a restructuring plan made between the defendant company, The Good Box Co Labs Limited (the “Company”) and its members and separate classes of its creditors pursuant to section 901F of the Companies Act 2006. At the time I said that I would give my reasons later. These are those reasons. This judgment should be read with my earlier judgment on the directions hearing for the convening of court meetings.
The parties
The Company was incorporated in July 2016. It carries on business as a provider of bespoke payment terminals for the benefit of charities and fundraisers. Donors make payments through the relevant payment terminals, without cash, on a digital basis utilising contactless devices. The company receives the relevant funds, and then transmits them to its respective clients. The Company also provides an online platform through which the terminals can be configured and their performance monitored. The Company's primary sources of income are hardware sales and leasing fees, fees charged on donations as processed, and monthly subscription fees in respect of each donation point.
The Company has over 2,200 clients in the UK and over the years has facilitated significantly over £10 million in donations to charities and other organisations.
The Company is regulated by the Financial Conduct Authority (the “FCA”) as a small payment institution.
The Company entered administration in June 2022. The two joint administrators are represented before me by Mr Neil Berragan of Counsel, instructed by Carrick Read Leeds. As well as making representations on behalf of the Company and as officers of the court, the Administrators have also issued an application for directions that they should sell the Company's business and assets. That application, having been adjourned previously, was also before me at the hearing on 16 January 2022.
The claimant is a shareholder, supplier and creditor of the Company. Its debts break down into: pre-administration debts of just over £914,000 and an administration debt in the order of £475,000 arising from it having provided funding to the Company in administration to enable it to continue to trade whilst rescue options were explored. As regards the administration funding provided by NGI, it has been acting as lead creditor/shareholder for a number of other shareholders and investors in the Company.
As regards the pre-administration debts owed to NGI, these arise from the supplier relationship that NGI has with the Company. In broad terms, NGI provided and provides the Company's technological support, ranging from systems design and build to maintenance and roll out. Its majority shareholder and sole director is a Mr Tibor Barna. He was also the Company's Chief Technology Officer (but not a director). As I have indicated, NGI is also a shareholder of the Company. It holds some 36,737 (0.02%) of the 1,398,231 issued Ordinary Shares of 0.005p each in the capital of the Company.
The Company and its entry into administration
The Company experienced the difficulties of a start up company that needed further capital to expand and become profitable. Further capital was raised over time but it proved insufficient. Statutory accounts of the Company for the year ended 31 August 2020 showed a net loss after tax of over £3.3 million.
By the Summer of 2022, the directors of the Company had reached the conclusion that the Company might be insolvent and were exploring various options. NGI considered that a restructuring plan was the best outcome whereas the directors of the company appeared more attracted by a pre-pack sale. Further, certain shareholders, holding between them a majority of shares in the Company, were not happy with any continued involvement of NGI with the Company.
By order of this court dated 28 June 2022 the Company was placed into administration on the application of NGI. The administrators appointed were Mr Jeremy Frost and Mr Stephen Wadsted (the “Administrators”). NGI agreed to provide certain funding during the administration to enable the Company to continue trading which was secured by a debenture, containing fixed and floating charges over the assets of the Company, and registered at Companies House on 5 August 2022.
The Administrators issued their proposals to creditors in a document issued on 18 August 2022. Of the hierarchy of objects comprising the statutory purpose of an administration, the Administrators indicated that their primary intention was to pursue objective (a), namely the rescue of the Company as a going concern. This was on the basis of an anticipation that, following a short period of trading, funded primarily by NGI, it should prove possible to restructure the Company and secure further financing thereby enabling the rescue of the Company by way either of a company voluntary arrangement (“CVA”) or a restructuring plan under part 26A of the Companies Act 2006.
In the event that objective (a), could not be achieved by way of a CVA or restructuring plan, the Administrators indicated that they would seek to secure a sale of the business as a going concern. In the event that administration objective (a) could not be achieved by way of such sale then it was anticipated that a sale of the business and assets of the Company would take place thereby achieving objective (b) of the purpose of administration, namely the achievement of a better result for creditors as a whole than would be likely if the Company were to be wound up without first being in administration.
The proposals included an estimated outcome statement. The statement of affairs showed a deficiency as regards creditors of over £10.047 million. There were three estimated outcomes by reference to liquidation, an administration sale and restructuring. On liquidation, there was an estimated deficiency as regards creditors of in excess of £15.7 million, with a return to creditors of 0.003p in the pound. On an administration and sale, with an estimated sale of assets for a consideration of just over £611,000, there was an estimated deficiency as regards creditors of over £15.6 million with an estimated dividend for creditors of 0.004p in the pound. On a restructuring, the company was estimated to be in a positive balance sheet position with net assets of over £35,000.
On 5 September 2022, a meeting of the Company's creditors approved the Administrators' proposals and set up a creditors' committee.
For the purposes of continued trading in administration, the FCA had prohibited the Company from taking on new business. It was hoped that this restriction would be removed in due course and that that, of itself, would enable the Company to raise additional capital. The FCA have not revealed their hand as to what approach they will take if the Restructuring Plan is sanctioned nor, as far as I can see, have they engaged with the Administrators or NGI on the matter.
Meanwhile, although the Administrators have not produced any revised estimated outcome statement it is clear that the position has deteriorated substantially. The return on an administration and sale of about 0.004p in the pound to creditors was dependent on a number of factors.
First, a sale (in administration) at a price of £611,625 was anticipated. The sale now anticipated is a sale at a price of £375,000. That does not include the sale of software and related intellectual property, but the Administrators are now (over 6 months since appointment) no more able than they were when they released their proposals to provide any estimate of the value of the same. There is no buyer lined up for the same. The Administrators consider that there is no room for continued trading and that the administration must be brought to a close once the sale has taken place and that trading cannot continue with a view to a further extended marketing period. Any further realisations therefore seem extremely speculative and unlikely.
Secondly, the estimated outcome was dependent on the administration funding to be repaid to...
To continue reading
Request your trial
-
Re Nasmyth Group Ltd
...dividend purposes and he relied on the decision of His Honour Judge Davis-White QC at the convening hearing in Re Good Box Labs Ltd [2023] EWHC 274 (Ch). In answer, Mr Haywood drew attention to the convening order which the judge had made in that case. He also relied on the general reserva......