Administration - Process


WHO CAN APPLY?

The company or director(s) and the holder of a qualifying floating charge can apply for an administration order using the relatively simple out of court procedure.

If a creditor wishes to apply for an administration order then they have to make the application to court which procedure is explained below. Additionally the court application can be used by the company or its directors as well as the justices' chief executive for a magistrate's court in exercise of the power conferred by Section 87A of the Magistrates Courts Act 1980.

HOW IS THE APPLICATION MADE?

Out of court application

The procedure is fairly simple and involves completing and filing certain documents at court. The applicant must have obtained the consent of a licensed Insolvency Practitioner "IP" to act as administrator. In practice the IP will assist the company or its director to prepare and lodge the appropriate paperwork at court. The FAQS on administration give more information about the process.

The applicant must give any qualifying floating charge holder 5 days notice of their intention to appoint an Administrator. The floating charge holder can apply to court to appoint an alternative IP as administrator if they are not happy with the company/directors' choice . The court is obliged to grant the Charge Holder's application unless based on the facts, a refusal can be justified.

If the application is by a qualifying floating charge holder, then 2 days notice must be given to any prior floating charge holder.

Application to the court

The application to court procedure requires submission of the following:

A statement by the proposed administrator that he/ she consents to the appointment and considers the purpose of the Administration is reasonably likely to be achieved.
An affidavit/witness statement
An application for administration - this must be served on any Qualifying Floating Charge Holder not less than 5 days before the hearing

 

THE EFFECT OF THE APPLICATION


Automatic Appointment - Where there is no floating charge holder who needs notification, the appointment of the administrator is automatic once the relevant documents are filed at court.

Interim Moratorium and then appointment - If there is a floating charge holder and notice of intention to appoint an Administrator has been filed at court, an interim moratorium is established from the date of filing.

During the interim moratorium period no steps can be taken by a creditor to enforce security, repossess goods or by a landlord to exercise a right of forfeiture and neither can any legal process be instituted or continued except with permission of the court. This means that the company's position is protected.

A moratorium will be established when an Administrator is appointed. The moratorium has the same effect as an interim moratorium except either the permission of the court or the Administrator has to be sought to instigate or continue action.

ADMINISTRATION - WHAT HAPPENS?

The powers of the Directors of the company cease, except as authorised, by the Administrator.

The Administrator, with the co-operation of the Directors of the company, must prepare proposals as to how the purpose of the Administration is to be achieved. The proposals must be prepared as soon as possible and presented to creditors within 8 weeks of the appointment of the Administrator.

Within 10 weeks of appointment the Administrator must convene a meeting of creditors to consider the proposals. If it is proposed that all creditors are to be paid in full or if there is no prospect of a return to non-preferential creditors, there is no requirement to convene a creditors meeting unless creditors request that a meeting be held.

The Administrator must submit 6 monthly progress reports to creditors.

As in certain other insolvency procedures, the Administrator has a responsibility to investigate the directors' conduct and a report has to be submitted to the Department of Trade and Industry within 6 months of the date of administration.

The Administrator has wide power and duties which must be exercised to achieve the purpose of the administration as quickly and efficiently as reasonable possible.

 

THE CONCLUSION


The procedure for ending the administration must be stated in the proposals presented to creditors and could include:-
company voluntary arrangement - e.g. to return control of the company to the directors.

voluntary or compulsory liquidation - so that a liquidator can distribute funds to unsecured creditors.

or by automatic termination after 12 months. The 12 month period can be extended by the agreement of more than 50% of the unsecured creditors or by a court application. (the Administrator could apply to court for permission to make a distribution to unsecured creditors, distribute funds and the Administration will then automatically end within 12 months).

The Next Step

The options for a financially distressed business need to be very carefully considered. Simply forward your details on our Contact Form and we will contact you. Alternatively ring us on our FREEPHONE ADVICE LINE 0800 781 0990.

There is  free debt help and advice available through a variety of debt charities. For more information, we recommend you visit https://www.moneyadviceservice.org.uk/en/tools/debt-advice-locator Alternatively if you are a business owner, self-employed or in a partnership, we recommend you visit https://www.businessdebtline.org/.

All debt solutions should be very carefully considered. Fees will be charged if a solution is taken in order for us to advise and administer the most appropriate action - all fees will be outlined during your consultation. Retained payment may place you further into arrears. You have the right to a cooling off period of 14 days. It is likely that your ability to obtain further credit in the short term will be affected and this may also be the case over the medium to long term.
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