Corporate Insolvency - Administration and Receivership Flashcards
(14 cards)
3 statutory objectives of administration?
1) Rescue the company as a going concern
2) Achieve a better result for the creditors as a whole than liquidation
3) Realise the company’s property to make a distribution to one or more secured/preferential creditors
What is administration and how does it differ from recerivership?
Administration is a collective insolvency procedure where an insolvency practitioner is appointed to act in the interests of all the creditors.
Receivership is an enforcement procedure that benefits only a specific secured creditor
Who may apply to court to appoint an administrator?
The company, its directors, a creditor, the supervisor of a CV, or a liquidator
What happens upon court application to appoint an administrator?
An interim moratorium begins, preventing creditor action until the court either makes or refuses the administration order
What are the 2 out-of-court procedures for appointing an administrator?
1) Appointment by the company or its directors
2) Appointment by a qualifying floating charge holder
What is a QFC - Qualifying Floating Charge holder
QFC that covers substantially all of the company’s assets and gives the power to appoint an administrator. It gives the holder priority in appointing administrators and enforcing security
Administrator key powers?
They may manage the company, dispose of property (with or without court consent), appoint/remove directors, borrow money, and initiate wrongful/fraudulent trading claims
What must an administrator do after appointment?
Within 8 weeks, produce proposals for the administration and circulate to creditors. If approved, they proceed with administration; if not, the company may be placed into liquidation
What is a Pre-Pack administration?
Involves pre-arranged sale of company assets/business completed immediately after administrators are appointed.
How is pre-pack sale to a connected person regulated?
Administrators must obtain creditor approval or a qualifying evaluator’s report
What is receivership?
Receivership is an enforcement process for the benefit of a specific secured creditor.
What are the 3 types of receivership?
- Administrative receivership - rare and only available for floating charges pre-2003
- Fixed charge receivership - creditor enforces security over specific assets e.g. land
- Court-appointed receivership - appointed in disputed or under specific legislation
What powers do fixed charge receivers have?
They manage and sell secured assets, collect rent, and act as the chargor’s agent. Their powers are set out in the security document and statute
What is the time limit for administration?
12 months, extendable with creditor consent or a court order
