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Dismissal of high-profile challenge to the appointment of joint administrators over a technology company specialising in post-quantum computing

27 February 2023

Michael Gibbon K.C. and Darragh Connell (acting for the joint administrators) and Nicholas Peacock K.C. and Edward Granger (acting for the appointing party) successfully resisted an expedited application challenging the appointment of joint administrators over a technology company.

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On 22 November 2022, joint administrators were appointed to Scentrics Information Security Technologies Limited (“Scentrics”) by the executors of a deceased qualifying floating charge holder. Scentrics was described in the proceedings as a “technology IP company operating in the field of post-quantum cryptography and advanced machine learning techniques”.

Mr Guruparan Chandrasekaran (Scentrics’ founder and CEO, represented by Quinn Emanuel Urquhart & Sullivan, LLP) sought to challenge the appointment on two grounds. The first concerned the construction of the contractual documents pursuant to which the appointment had been made; the second relied upon an alleged fundamental defect in the notice of appointment.

Mr Chandrasekaran’s application was expedited on account of, inter alia, the alleged impact of the administration on Scentrics’s code, its patent strategy, and its planned commercialisation. ICC Judge Mullen also listed the matter for hearing before a High Court Judge in view of the very high value ascribed by Mr Chandrasekaran to Scentrics, the factual complexities of a specialist nature, and the points of law requiring determination.

The matter came before Mr Justice Richard Smith on 21 February 2023; and he gave judgment on 27 February 2023, in which he dismissed the application on both grounds. On the first ground, the Court rejected the construction of the contractual documents for which Mr Chandrasekaran had contended. On the second ground, the Court held that the notice of appointment did not contain any defect (when interpreted according to the standard of the reasonable recipient reading it in context); and that, even if that finding was wrong, any defect in the notice of appointment was not fundamental, had not caused any injustice (substantial or otherwise), and thus was capable of waiver under r.12.64 of the Insolvency Rules 2016.

The application was successfully resisted by Michael Gibbon K.C. and Darragh Connell instructed by Osborne Clarke LLP for the joint administrators, and Nicholas Peacock K.C. and Edward Granger instructed by Watson Farley & Williams LLP for executors of the deceased qualifying floating charge holder.

For further information, please contact the clerks.

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