11 - BL - Insolvency corp. Administration

Question 1

Administration
What are the objectives of administration?

Answer 1

(a) rescuing the company as a going concern, or

(b) achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up…,

(c) realising the property in order to make a distribution to one or more secure or preferential creditors.”

Question 2

Administration
What are the two procedures for appointing an administrator?

Answer 2

• court procedure
• out of court procedure

Question 3

Administration
Who can appoint an administrator in the court procedure?

Answer 3

• company
• directors
• creditor
• CVA supervisor
• Liquidator

Question 4

Administration
What happens following the application for administration in the court procedure?

Answer 4

• an interim moratorium until the admin order is made or the application is dismissed

(court procedure only really used where a winding up petition is commenced by a creditor and the directors want an administrator instead.)

Question 5

Administration
Who can appoint an administrator in the out of court procedure?

Answer 5

• company 🎩
• qualifying floating charge holder 🚣

Question 6

Administration
What are qualifying floating charge holders?
🚣

Answer 6

A QFCH means the holder of

• a qualifying floating charge which relates to the whole or substantially the whole of the company’s property.

AND

• loan states the act applies to the charge, or has the power to appoint an administrator.

A QFCH is often a bank.

Question 7

Administration
What are the implications of having a QFCH if the directors wish to seek an administration?

Answer 7

• the company/directors will have to file a notice of intention to appoint an administrator (“NOI”) at court and send a copy to any QFCH’s
• the notice gives the QFCH 7 days notice to consent or appoint its own choice of administrator.
• Once a NOI has been filed the company will benefit from a 14 day interim moratorium.
• once the 14 days have passed, the company will file a notice of appointment at court. The administration then takes effect.
• A first ranking QFCH can appoint its own administrator by filing a Notice of Appointment which appoints an administrator immediately on its filing.

Question 8

Administration
What are the implications of having 2 QFCH’s?

Answer 8

the lower ranking QFCH must give 2 days notice to the higher and the appoint their own receiver only with the agreement of the higher QFCH.

Question 9

Administration
Do the directors retain power during an administration?

Answer 9

No

Question 10

Administration
During administration, the company has the benefit of full moratorium - True or False?

Answer 10

True:-

• No order or resolution to wind up the company can be made or passed;
• No administrative receiver of the company can be appointed;
• No steps can be taken to enforce any security over the company’s property or to repossess goods subject to security, hire purchase and retention of title;
• No legal proceedings, execution or other process can be commenced or continued against the company or its property, and
• A landlord cannot forfeit a lease of the company’s premises

Question 11

Administration
Can a QFCH appoint its own choice of administrator during an administrative moritorium?

Answer 11

Yes

Question 12

Administration
What happens in an administration?

Answer 12

• there is a full moritorium

Question 13

Receivership
What is Receivership?

Answer 13

Receivership is an individual enforcement procedure which benefits only the appointing creditor.

Question 14

Receivership
Who can appoint a Receiver?

Answer 14

Fixed charge holders.

It will be a condition of the debenture that a receiver can be appointed.