Court of Appeal revives improper-purpose challenge to out-of-court administrator appointment
Lenders and distressed-debt acquirers pursuing loan-to-own strategies face a revived equitable challenge where the sole purpose of enforcement is acquiring the target rather than recovering debt.
The Court of Appeal in Glint Pay Ltd v Baker partially reversed the High Court, holding there is a realistic prospect that an out-of-court administrator appointment under Schedule B1 of the Insolvency Act 1986 was invalid because the chargee's sole subjective purpose was to acquire the company's business, not to recover the debt. The court confirmed that no broad Braganza-style rationality duty constrains a chargee's core enforcement rights, but accepted a narrower implied term that ancillary powers (such as information requests) must be exercised for the security holder's legitimate commercial aims. The decision distinguishes mixed motives (permissible under Cukurova) from a sole improper purpose (potentially fatal). Practitioners structuring loan-to-own or debt-acquisition transactions should document a genuine debt-recovery rationale, anticipate evidentiary scrutiny of timing and sequencing, and expect further guidance when the case proceeds to trial.