9a Administration

Question 1

What are the two main options available to a company in financial difficulty?

Answer 1

Administration
Liquidation

Question 2

What is administration?

Answer 2

Appointment of a insolvency practitioner to manage affairs, business and property of the company in attempt to rescue it and allow it to keep trading as a going concern.

Question 3

What is liquidation?

Answer 3

Winding up of the company thus bringing its life to an end.

Question 4

What are the main purposes of administration?

Answer 4

• Rescue company and trade as going concern.
• Achieve better result for creditors
• If neither is practicable, then make a distribution to one or more secured or preferential creditors by selling company’s assets as long as this doesn’t unnecessarily harm interests of the creditors as a whole.

Question 5

Who can appoint an administrator?

Answer 5

• The court can appoint a practitioner after receiving a petition by the company, directors or creditors.
• Holder of a qualifying floating charge (QFCH).
• The company or directors as long as liquidation has not begun and notice of at least 5 days must be given to a QFCH.

Question 6

How would a company petition the court?

Answer 6

By passing an ordinary resolution.

Question 7

Under what circumstances would the court appoint an administrator?

Answer 7

If it’s likely the company would be unable to pay its debts and the administration order is likely to achieve its objectives.

Question 8

What is a moratorium period?

Answer 8

A period after the administrator has been appointed where several legal consequences occur for the company.

Question 9

What are the legal consequences during the moratorium period?

Answer 9

• Cannot enter liquidation.
• No other legal actions can be started against the company.
• Charges cannot be enforced and administrator can sell any assets despite having charges over them.

Question 10

How long does the moratorium period last for?

Answer 10

As long as the company is in administration for.

Question 11

Do Directors still have any powers while in administration?

Answer 11

No, all powers are suspended and the administrator may appoint/remove them as they please.

Question 12

How long does administration last for?

Answer 12

Normally 12 months but can be extended by court consent or agreement of the majority of creditors.

Question 13

What powers does an administrator have?

Answer 13

• Acts as an agent of the company to bind it in contracts.
• Can buy/sell company assets.
• Can borrow money on behalf of the company.
• Can engage or remove employees.

Question 14

What must/can the administrator do after 7 days of appointment?

Answer 14

• Must file notice of appointment with registrar after 7 days.
• Can request statement of affairs from the directors which must be provided within 11 days.

Question 15

What must the administrator do within 8 weeks?

Answer 15

Draw up a statement showing how they intend to meet the aims of the administration.
This statement must be submitted to registrar, company members and creditors.

Question 16

When the administrator writes up his statement within 8 weeks of their appointment, what happens if the creditors reject the proposal?

Answer 16

The administrator can be dismissed by the court.

Question 17

How would a creditor approve the administrators proposal?

Answer 17

• The deemed consent method
• Virtual meeting
• Other reasonable method

Question 18

What do the creditors have the right to do when a company is put in administration?

Answer 18

Form a committee of 3-5 creditors and a meeting must be held by the administrator within 6 weeks of its establishment.