What is an “event of default”  in a debenture containing a right to appoint administrators; what is the “purpose of administration"; and what is a “collateral purpose” in the debenture holder's appointment of administrators? 

These are (some of !) the questions swirling around the claim made by Glint Pay Ltd, against its former administrators  following the Court of Appeal's decision to restore the company's struck out claims against those administrators.

In a short but consequential judgment, Zacaroli LJ held that whilst the judge at first instance had been correct to conclude that Glint had been in breach of its information obligations in a debenture granted to its original lender, it was arguable that the appointment of administrators by the purchasers of that security, as a consequence of the accelerated repayment obligation that then kicked in, could be construed as the furtherance of an improper purpose. In short, Zacaroli LJ concluded that it was arguable that not withstanding the initial breach, the appointment of the administrators could be impugned as invalid and of no effect.

Having restored Glint's claims, and with trial some way off, it remains to be seen how these arguments will be resolved, and whether the market for debenture purchase will react to this failed “loan to own” acquisition strategy, or whether practice has already moved on in the intervening seven years  since the strategy  rolled over the then start up. The assignee in Glint  was reportedly a disappointed equity suitor whose failed offer to acquire 51% of the then start up gold based investment and payment app then bought the security and debt of the original debt investor. The court has heard that Glint had been solvent, able to pay its creditors and to source refinance; the administration lasted two months, and was brought to an end by an angel investor who paid off the secured debt, interest and the administrators' fees and expenses. Given that the administrators' consolidated progress report includes fees and expenses of c£1.7M across the three company group, what appeared in 2019 to have been a brilliant strategic move by the disappointed suitor, continues to grow expensive arms and legs for all concerned.

The validity of the appointment has yet to be resolved, but the Court of Appeal was clear that whilst the statutory nature of the administrators' obligations governed their post appointment behaviours, the subjective prior intention of the appointor is open to challenge and comparison with pre-existing equitable principles.

https://www.bailii.org/cgi-bin/format.cgi?doc=/ew/cases/EWCA/Civ/2026/1023.html&query=(glint)+AND+(pay)