Purpose of Administration

There are three main purposes of an Administration:

• Rescuing the company as a going concern;
• Achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration) or
• Realising property in order to make a distribution to one or more secured or preferential creditors.

Process

The following can apply for the appointment of an Administrator:

• The company or its directors;
• A holder of a qualifying floating charge (QFCH) or
• A creditor.

Board meeting: The directors hold a meeting of the board of directors or pass written resolution to approve the issue of notices required to place the company into administration.

Notice of intention to appoint:Five business days’ notice of intention to appoint an Administrator must be given to any QFCH of the company.  The QFCH then has the option of whether they wish to appoint their own Administrator.  This will take preference over the directors’ choice.

Notice filed at court:Notices of the appointment of an Administrator are filed with the court with the written consent of all QFCHs and the proposed Administrator(s) consent to act.  Upon filing the notice of intention to appoint in Court the Company will obtain an interim moratorium giving it protection against creditor action

Effective Date

The appointment of the Administrator is effective from the date and time that the above notice is filed with the court.

Effect of Administration Order

There is a full moratorium on the company. The Administrator will take full control over the business operations with a legal obligation to act in the best interest of the creditors. The Administrator will outline a recovery plan which involves repaying as many debts as possible and identifying any opportunities that can save money with the goal of saving the company.

Post Appointment Notices:Upon appointment the Administrator sends notice of the Administration to all known creditors, the Court, the Registrar at Companies House and (if relevant) the Pensions Regulator or the Pension Protection Fund.

Statement of affairs: One or more of the company’s current or former directors must provide a statement of the company’s affairs. This statement details all the company’s assets and liabilities, including any contingent liabilities and assets subject to fixed or floating charges.

Administrator’s proposals:The Administrator have eight weeks to set out formal administrative proposals to creditors.  The Company’s statement of affairs is attached to the proposals which are sent to all know creditors, the Court and filed at Companies House.

Decision Procedure:The Administrator may seek a decision from the creditors when they issue the proposals. This will only be necessary if there is a prospect of a distribution to unsecured creditors.  If a decision is sought creditors will have the opportunity to:

• Modify the Administrator’s proposals
• Appoint a Committee to assist the Administrator and
• if no Committee is appointed, fix the basis of the Administrator’s fees and disbursements .

Progress Report:The Administrator is required to send a progress report at least once every six months to all creditors involved until the administration ceases.

Duties of the Administrator

The Administrator must protect the interests of all creditors as a whole.

While in administration the Administrator will consider the potential viability of the company going forwards, while giving careful consideration to the company’s outstanding creditors and ensuring any future steps will increase their potential returns as much as possible. An exit out of administration can then be planned.  The Administrator must achieve one fo the three main purposes of administration in order of priority.

Conclusion of the Administration

If the Administrator concludes that the company is viable he will either decide to recommend a sale of the company or propose accompany voluntary arrangement.  Information regarding company voluntary arrangements can be found here.

If the Administrator concluded that the company is unable to recover it will be placed into Creditors Voluntary Liquidation or compulsory wound up. Information regarding Creditors Voluntary Liquidation can be found here.  Information regarding compulsory winding up can be found here.

Advantages of Administrations

The advantages of an administration include:

• It gives the company breathing space to plan for survival;
• It prevents creditors taking action which could be to the detriment of the future existence of the company and
• It is an opportunity for the company to be restructured, at the same time removing inefficient or non-profitable parts of the business.

Disadvantages of Administrations

There are disadvantages to an administration.  These include but are not limited to:

• The Company must give notice that it is operating under administration to the registrar of companies, creditors, employees and customers;
• Directors also lose control of the day to day workings of the business, with the administrators taking temporary charge and
• It is not a permanent solution.