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Administration and the Role of Administrators

Companies with an Administrator appointed no longer have directors managing the company financially or operationally. The appointed Administration in the UK requires a licensed Insolvency Practitioner. Their primary objective upon appointment remains to manage the company’s business and assets for creditors.

An administrator is a person or persons appointed under Schedule B1 of the Insolvency Act 2012 to manage the affairs of the business,

The Administrator, once appointed, attains ‘Officer of the court’s authority.

A company going into Administration objectives.

The leading administrators objective, therefore, is: 

  • “To re-establish profitability by restructuring the company’s business, either as a whole or part company. So, involves realising the company’s assets so to achieve a more favourable result for creditors than could be obtained on immediate winding up”.

So, the objectives of a company going into Administration are, therefore, to

  • Rescue a failing company;
  • Then negotiate a better return on the company’s assets;
  • While arranging a more beneficial value for the company’s assets versus what a creditor would offer during a liquidation;
  • To realise the company’s assets to distribute to preferential creditors of the company.

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How does a company go into Administration?

Company Administration commences when an Insolvency Practitioner is appointed as the Administrator. The appointment can take place in the following ways:

  • A court administration order;
  • By a registered floating charge holder, may appoint an Administrator; 
  • The company and its directors appoint their Administrator.

So once appointed, they are required to act quickly and perform their responsibilities as efficiently as achievable.

What occurs when the company has an Administrator appointed?

So when you put your company into administration. Does it depend on the current state of the company? The company is initially protected from insolvency proceedings through a moratorium.

Administrative Receiver

The Administrative Receiver must relinquish their office at this stage. Ensuring any receiver of the company’s property also vacates.

The Gazette

The Gazette records statutory notices and advertisements. Published daily online, notices placed by the Registrar of Companies in England and Wales in the Notifications Supplement of the London Gazette. 

The Administrator must notify their appointment in The Gazette as soon as possible. 

Sending notice to the company and creditors

Once notification is delivered to ‘The Gazette’. The Administrator then must send notice of their appointment to the company and each of its creditors. 

What the Administrator needs to send and to whom

Once the Administrator appoints, they must notify the Registrar at Companies House of their appointment. During the period of Administration. Business documents must clearly show that the companies have an administrator appointed, and all orders the administrator actions are on behalf of the company, not a personal liability. If the company maintains any website, this must also note the appointment immediately.

Requesting and giving statements

Upon the Administrator’s appointment, they will request a statement of the company’s affairs from relevant parties. They must issue a report describing proposals for delivering the Administration’s outcomes. If the outcomes remain unachieved? Then they must make a report highlighting why this is the case. The Administrator must issue a report within eight weeks of the company entering Administration.

After drafting proposals, the Administrator is required to send them to

  • The Registrar at Companies House
  • All the company’s creditor:
  • All appropriate company members.

With these proposals, the Administrator remains required to advise and invite the company’s creditors to a meeting of creditors. Wishing then to secure approval of the proposals. Once approved, then:

  • Call for another meeting of creditors;
  • Establish a creditors’ committee;
  • Commence dealing with matters between the company members and the creditors.

Any decisions made at this meeting require forwarding to the ‘Registrar of Companies’.

You may remove an administrator by creditors with a majority. However, this is not the case when appointed by a charge holder.

When does Administration of a Company end?

An administration period ceases by either:

  • The term of the administrator’s office ends. Normally the term is one year, even if it can be extended with the approval of creditors;
  • The Administrator in office makes an application to the court to cease the Administration, as the original purpose remains unattainable.
  • The goal of the administration period was achieved, and the company or directors sent a notification to the courts.
  • A company creditor claims the Administration’s motives are inappropriate. The court must uphold this, and the Administrator must send a report to the Registrar.
  • Voluntary winding up commences when the company satisfies the secured creditor, leaving monies for distribution for creditors unsecured.
  • Dissolution may follow if the company has no realisable assets for distribution for creditors unsecured. Though dissolution is within three months of filing the proposal, an order may either suspend or stop proceedings.

Can administration revert to Creditors Voluntary Liquidation?

Yes.

By returning to apply for voluntary liquidation from creditors if they review the situation and believe that unsecured creditors can receive a distribution if the assets of the company’s fully clear secured creditors are obvious and leave available money. 

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