Administration

The purposes of Administration were changed by the introduction of the Enterprise Act 2002 on 15 September 2003.

The new purposes of Administration follow a strict hierarchy as follows:

  • Rescue the company as a going concern and if not reasonably practicable then;
  • Achieve a better result for the company’s creditors as a whole than would be likely if the company were wound up and if not reasonably practicable then;
  • Realise the company’s property in order to make a distribution to one or more secured or preferential creditors

New Out-of-Court Administration Procedure

The ‘new’ out-of-court procedure can be used where the appointment of an Administrator is being made by:

  • The Company
  • Its Directors
  • A Qualifying Floating Charge Holder (QFCH)

When a secured creditor has a QFCH over a company’s assets, the directors or shareholders of that company must give the QFCH a minimum of 5 business days notice if they intend to appoint an Administrator.

Post-Appointment Procedure

An Administration protects the Company from any creditor action which the Administrator facilitates in his proposals.  These may include trading the business during the administration period, generally to enable a buyer to be sought on a going concern basis.  An Administration may also trade  a buisness to complete a potential order or to convert raw materials into finished products.

Administrator’s proposals to creditors

  • Under the new regime the Administrator is required to send his statement of proposals to all known creditors within a period of eight weeks
  • Notice of the initial creditors meeting is given with the proposals and the meeting must now be held within a period of ten weeks from the date of the Administration

Period of Administration

  • Automatically ceases at the end of 12 months but can be extended
  • If the out-of-court procedure is used and the purpose has been fulfilled, the Administration ends when the Administrator files the prescribed notice at Court
  • The Court may order that the appointment ceases upon the application of a creditor

Statutory exit routes

  • Creditors Voluntary Liquidation
  • Dissolution

The Administrators proposals may include a proposal for a Section 425 Scheme of Arrangement or Company Voluntary Arrangement

An Administration application must still be made to court if:

  • Unsecured creditors wish to make an appointment
  • An Administrative Receiver has been appointed
  • A Provisional Liquidator has been appointed
  • A Winding-Up Petition or Administration application is outstanding

Administration is not available to companies that have applied for one within the previous 12 months.