Part 8 – The end of the administration
March 2013
56.1.101 The automatic end of the administration
The appointment of an administrator automatically ends after one year from the date it takes effect. The period of administration may be extended:
Any extension of this period must be made before the first anniversary of the administration.
56.1.102 Further extension of the period of administration
The administrator’s term of office can only be extended once by the consent of the creditors. Where an extended administration period by consent has been agreed further extensions are only possible by order of the court. Once an extended administration period has expired it cannot be further extended [Note 2].
56.1.103 Creditor’s application to court to end the administration
A creditor may apply to the court for an administrator’s appointment to cease from a specified time. For the application to be considered by the court it must allege an improper motive by the person presenting the application for an administration order or by the person appointing the administrator. The court on hearing the application may dismiss the application, adjourn the hearing, conditionally or unconditionally, make an interim order or make any other order it considers appropriate [Note 3].
56.1.104 Administrator’s application to court to end the administration
The administrator may apply to the court to end the administration from a specified time where:
The court on hearing the application may dismiss the application, adjourn the hearing, conditionally or unconditionally, make an interim order or make any other order it considers appropriate [Note 4].
56.1.105 Termination of administration - appointment by court order
Where the administrator believes his/her objective has been achieved or has been “sufficiently achieved” he/she may take steps to end the administration. Where an administration order was made (see Part 2) the administrator can apply to the court for the administration to end at a specified time. The court on hearing the application may dismiss the application, adjourn the hearing, conditionally or unconditionally, make an interim order or make any other order it considers appropriate [Note 5].
56.1.106 Termination of administration - appointment other than by court order
Where an administrator who was appointed by the holder of a floating charge (see Part 3) or the company or directors (see Part 4) considers the objective has been achieved or “sufficiently achieved” he/she may file a notice of outcome (Form 2.32B) together with a final progress report with the court and the registrar of companies. A copy of the notice and progress report should be sent within 5 business days to every known creditor. The administrator’s appointment ends from the date and time the notice is filed at court [Note 6].
56.1.107 Pre-pack administrations
A pre-pack administration is where the sale of the insolvent company's business and/or assets has been agreed by the insolvency practitioner prior to his/her appointment as administrator. The sale is then made immediately upon or shortly after the appointment of the administrator. The administrator must comply with the Statement of Insolvency Practice, SIP 16 (introduced on 1 January 2009) and provide creditors with detailed reasons why a pre-pack sale was undertaken and how it helped achieve the purpose of the administration. This must be sent to all known creditors within 14 days of the sale. Once the objective has been achieved, which may be within a short period of time, the administrator will follow the procedures in paragraphs 56.1.105 and 56.1.106 to end the administration. The official receiver should follow the guidelines in paragraph 56.1.136 when dealing with pre-pack administrations.
56.1.108 Voluntary liquidation following administration
Where the administrator has paid, or set aside, the amount due to the secured creditors and has funds available for a distribution to the unsecured creditors he/she may serve notice that his/her administration is to end and that the company will be wound up voluntarily. The notice should be served on the registrar of companies and as soon as reasonably practicable on the court and all the known creditors. On the registration of the notice by the registrar of companies the administrator’s appointment ceases and the company shall be wound up as if a resolution for voluntary winding up was passed by the creditors on that date (see paragraph 56.138) [Note 7].
56.1.109 Appointment of voluntary liquidator
The administrator on receipt of the notice from the registrar of companies (see paragraph 56.1.108) must, as soon as practicable, send a final progress report to the registrar of companies and to all those who received notice of his/her appointment. The final notice must include details of the assets to be dealt with in the voluntary liquidation. The administrator may propose a liquidator, including him/herself, in his/her final progress report. The creditors may appoint a different liquidator by amending the final progress report [Note 8]. If the administrator does not propose a liquidator and the creditors fail to appoint an alternative, the administrator is appointed liquidator [Note 9].
53.1.110 Public interest winding up
Where a provisional liquidator is appointed or an order is made for the winding up of a company in administration by the Secretary of State in the public interest [Note 10] or on the petition of the Financial Services Authority [Note 11] the order, must either:
Where the court orders the continuation of the administrator’s appointment it may specify which powers contained in Schedule B1 apply. The court may also modify any powers contained in Schedule B1 as they apply to the administrator [Note 12].
56.1.111 Dissolution after completion of the administration
Where the administrator is close to completing the administration and believes there will be no distribution to creditors he/she shall file a notice to this effect at court and with the registrar of companies. The administrator should send a copy of the notice to every known creditor together with a final progress report [Note 13]. On the registration of the notice by the registrar of companies the administration ends. Three months from the date of filing the notice the company will be dissolved, unless the court orders otherwise [Note 14].
56.1.112 Vacation of office by an administrator
A person may cease to be an administrator for the following reasons:
On ceasing to be an administrator the person is discharged from liability in respect of any action during his/her time as administrator [Note 15]. The discharge of the administrator does not prevent the court examining his/her conduct in respect of alleged misfeasance (see paragraphs 56.1.99 and 56.1.100) [Note 16].
56.1.113 Date the administrator’s discharge becomes effective
Where an administrator has died the discharge takes effect from the time notice of his/her death was given to the court or such other time as the court may determine [Note 17]. Notice of the administrator’s death should also be given to the registrar of companies [Note 18]. Where the administrator was appointed by the holder of a floating charge (see Part 3) or the company or directors (see Part 4) he/she may be discharged at a time appointed by a resolution of the creditors’ committee, or if there is no creditors’ committee, by resolution of the creditors. In any event, the discharge can become effective at a time specified by the court [Note 19].
56.1.114 Replacing an administrator
An administrator can be replaced when he/she:
The appointor of the original administrator or the court may appoint the replacement administrator (see Part 2 for further details of a court appointed administrator, Part 3 for further details of an administrator appointed by the holder of a floating charge and Part 4 for further details of an administrator appointed by the company or its directors) [Note 20].
56.1.115 Administrator’s entitlement to remuneration
The administrator is entitled to receive remuneration for his/her services. The basis of the remuneration should, in the first instance, be fixed by the creditors’ committee. If there is no creditors’ committee the creditors as a whole may fix the basis of remuneration, either at the meeting to approve the statement of proposals (see paragraph 56.1.78) or at a meeting specifically called to fix the basis of remuneration. Where the creditors’ committee and/or a meeting of creditors fails to fix the administrator’s remuneration he/she may make an application for the court to decide. The application to court must be made within 18 months of the administrator’s appointment [Note 21].
56.1.116 Formulae for determining the administrator’s remuneration
The administrator’s remuneration can be determined using one the of the following three “bases”:
56.1.117 Remuneration for post 6 April 2010 administrations
The formulae for post 6 April 2010 administrations may be fixed in any one or more of the three “bases” mentioned in paragraph 56.1.116. Different “bases” may be used for different functions carried out by the administrator [Note 23]. Where a percentage of the assets is used as the “base” different percentages can be used for different functions [Note 24].
56.1.118 Matters to be considered when deciding the level of remuneration
The creditors’ committee or creditors’ meeting must consider the complexity (or otherwise) of the case, any exceptional responsibility that falls on the administrator, the effectiveness with which he/she is carrying out or has carried out his/her duties and the value and nature of the company’s assets. The court, in post 6 April 2010 administrations, should consider these factors when considering an application by the administrator to fix his/her remuneration (see paragraph 56.1.115) [Note 25].
56.1.119 Administrator’s application to creditors to change his/her remuneration
Where the administrator feels the “base” of remuneration fixed by the creditors’ committee is inappropriate, or the rate or amount insufficient, he/she may request that it be changed or increased by resolution of the creditors [Note 26]. Where the administrator has given notice that no initial meeting of creditors is required (see paragraph 56.1.84) the consent of unsecured creditors is not required to approve a change in his/her remuneration instead, an application may be made to the court (see paragraph 56.1.121).
56.1.120 Administrator’s application to court to change his/her remuneration
Where the administrator feels the “base” of remuneration fixed by the creditors’ committee or by resolution of creditors is inappropriate, or the rate or amount insufficient, he/she may apply to the court for it to be changed or increased. The administrator must give notice to the members of the creditors’ committee, or, if there is no committee, to those creditors directed by the court. A member of the creditors’ committee or, if there is no committee, a representative of the creditors may appear, or be represented at the hearing. The costs of the administrator’s application may, if the court orders, be paid as an expense of the administration [Note 27].
56.1.121 Excessive administrator’s remuneration – pre 6 April 2010
Where a creditor considers the administrator’s remuneration is excessive he/she can, with the support of at least 25% in value of the total liabilities (including their own debt), apply to the court for the remuneration to be reduced. Any hearing would be conducted under the old Rule 2.109 of the Insolvency Rules 1986 (applicable at the time), now repealed and replaced. The court may, if it thinks that insufficient reason has been shown for a reduction, dismiss the application without a hearing. Where the court considers the application to be well founded it shall make an order reducing the administrator’s remuneration. Unless the court directs otherwise the costs of the application are not an expense of the administration.
56.1.122 Excessive administrator’s remuneration – post 6 April 2010
A secured creditor, or an unsecured creditor with the permission of the court or the support of at least 10% in value of the unsecured liabilities (including their own debt) may apply to the court if they consider the administrator’s remuneration or expenses are excessive, or the remuneration “base” (see paragraphs 56.1.115 and 56.1.116) is inappropriate. The application must be made within 8 weeks of receipt of the progress report first reporting the remuneration or expenses, unless the court changes the time limit.. The court may, if it thinks that insufficient reason has been shown for a reduction, dismiss the application without a hearing. Where the court considers the application to be well founded it must make one of the following, an order:
Unless the court directs otherwise the costs of the application are not an expense of the administration [Note 28].
56.1.123 Review of the administrator’s remuneration or expenses
In some administrations there may be a material and substantial change which affects the “base” on which the remuneration and expenses of the administrator should be charged. The administrator may request that his/her remuneration be altered. The request should be made to, either, the creditors’ committee, the creditors or the court, dependant on which of these fixed the original remuneration. If the administrator or creditors are not satisfied with the decision they may challenge it (see paragraphs 56.1.119 to 56.1.122) [Note 29]. Pre-administration expenses are dealt with in paragraphs 56.1.79 and 56.1.80.
56.1.124 Order of payment of administration expenses
The administration expenses, incurred in accordance with the Insolvency Act 1986 and the Insolvency Rules 1986, should be paid in the following order:
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