It is usual for administrators to ask for an administration to be extended by 12 months – but we have seen the courts agree to longer periods. For example, certain of the Lehman group company administrations were extended by periods of four and six years – having previously been extended by eight. 

In the more recent case of VTB Capital Plc[1] the court extended the administration period for 5 years.

So, when is it that the Court is likely to agree to a long extension? Bearing in mind that extensions aside, the legislation only provides for an administration to last for 12 months.

Will distributions be made within the administration?

In many of the cases where there have been long extensions the relevant companies were in distribution mode.

There is a “working assumption” that when a company is in distribution mode an administrator’s term of office should be extended [2] – unless there is “good cause” not to.

In VTB the administrators had not yet sought permission to distribute – but were pursuing strategies to achieve that. Given the possibility of a surplus in the administration, the judge agreed that it would be disadvantageous to initiate liquidation to make a distribution to creditors. He further agreed that a distribution in administration (or through the scheme – which was also being pursued) would produce a better result for creditors than a liquidation.

If distributions can (or are likely to) be made in administration and the company can subsequently move from administration to dissolution, an IP is likely to be able to persuade the court that placing the company into liquidation is unnecessary particularly when doing so is likely to lead to increased costs and delay distribution.

But that is not to say that long extensions are reserved only for those cases where there is likely to be a distribution.

Are long extensions limited to cases where the company is in “distribution mode”?

We have only seen reported cases on long extension periods where there is likely to be a distribution within the administration, but that does not necessarily mean that a long extension is unavailable in other circumstances.

Provided the court is persuaded that administration is the better option, it is likely to be open to extend for a long period – time to make distributions, complex and high value cases where, as there was in VTB there are a “considerable number of moving parts” are likely to the type of cases where this is possible.

Where there is a concrete strategy (as there was in VTB) the court will be mindful that short extensions on a piecemeal basis are only likely to increase cost and uncertainty.

The court in Lehman[3] recognised that administrators are professional insolvency practitioners, who always have the obligation to consider, on a continuing basis, whether their functions are either at an end or might more effectively be brought to an end in favour of some other insolvency process.

Furthermore, as also recognised in Lehman, individual creditors are entitled to apply to court if they consider an administration is continuing too long or for no sufficient purpose, or if there are factors which suggest, contrary to the best estimate of the joint administrators and the court at the time, the extension is excessive.

These are useful points to remember when an administrator asks for a longer that “usual” extension – if a long extension is requested but ultimately a shorter period is required, the administrator will be obliged to bring it to an end, and creditors have the ability to step in as well (although query whether and if they would).

On the flip side though – the court will generally be mindful of not granting long extensions for the sake of it. 

However, the court may well be persuaded to grant a long extension in a case other than one where the company is in distribution mode where an administrator can

• show that the purpose of the administration remains reasonably likely to be achieved
• there is no prejudice to creditors caused by an extension
• creditors are on board
• there has been and will be progress in the administration
• an alternative process is not appropriate (and may incur further costs); and
• that is reasonable for a longer administration period to be granted

Given the above, and always bearing in mind the administrator’s duty to bring an administration to end when the purpose has been achieved, there seems no reason to limit long extensions to those cases where the company is in distribution mode.

Further reading

See Administration Extensions – Key Considerations for UK Insolvency Practitioners

[1] VTB Capital Plc (In Administration) [2024] EWHC 2612 (Ch)

[2] In re Lehman Brothers International Europe (in administration) [2016] EWHC 3379 (Ch)

[3] In re Lehman Brothers International Europe (in administration) [2016] EWHC 3379 (Ch)