Administration is available to a company that is (or likely to become) insolvent. It is designed to protect a company whilst plans are formulated to achieve one of the objectives (see below). Administration is also available to a partnership and reference below to company and directors should be read as partnership or partners.
Once a company is placed into administration, it is placed under the control of an insolvency practitioner (called the administrator) and receives protection from creditors (known as a moratorium) which prevents action being taken against the company without the permission of the court or the administrator.
Objectives of Administration:
There are three objectives of administration as laid out by the insolvency legislation:
- To rescue a company as a going concern.
- To achieve a better position for creditors as a whole than would be achieved if the company was immediately wound up.
- Realising assets in order to make a distribution to secured or preferential creditors.
Who can Appoint an Administrator?
An administrator can be appointed by either:
- The courts – on an application from creditors, directors, shareholders or partners.
- The holder of a qualifying floating charge over the assets of the company.
- The company or its directors.
Once an administrator is appointed he takes over the management of the company from the directors and is responsible for any decision to continue or discontinue trading. He also has control over how the company and/or its assets are disposed of.
The administrator must send his proposals (for how the purposes of administration will be achieved) to creditors within eight weeks of his appointment. The proposals must be approved by creditors using a decision procedure which must be held within ten weeks of appointment. The proposals can be approved, modified or rejected by creditors.
How does an Administration End?
Administration may end in the following ways:
- Automatically after one year – but this period may be extended with the agreement of the creditors or the permission of the court if more time is needed to achieve the purpose of administration;
- By court order, if the administrator thinks the purpose of administration cannot be achieved, or, where he was appointed by the court, he thinks the purpose has been achieved;
- Where the administrator was appointed out of court, he thinks the purpose has been achieved.
On conclusion of an administration:
- the company may be returned to the control of its directors and management;
- the company may go into liquidation;
- the company may be dissolved (if there are no funds for distribution to unsecured creditors);
- if a voluntary arrangement has been agreed during the administration, the arrangement may continue according to its terms (it is possible for a voluntary arrangement to run concurrently with an administration).
What Services can PBC Business Recovery & Insolvency Undertake?
PBC Business Recovery and Insolvency can undertake the following services:
- We can advise directors whether administration is appropriate.
- Where appropriate, we will act as administrators and arrange for solicitors to prepare the necessary documentation to place the company into administration.
- We can act on behalf of creditors or shareholders concerned about a company and if appropriate arrange for solicitors to prepare the necessary documentation to petition the court for an administration order to be made against the company.