FAQS
What is administration?
The administration procedure was introduced by the Insolvency Act 1986, as amended by the Enterprise Act 2002, to provide a company, limited liability partnership or partnership with a breathing space to allow a rescue package or a plan for the more advantageous realisation of assets to be put in place.
How does it differ from receivership and voluntary liquidation?
An administrator has control of all the company’s assets and has a duty to the creditors in general whilst a receiver or administrative receiver only has possession of the charged assets in the interests of the secured creditor. A voluntary liquidation takes place when there is no intention of the company, or its business, being rescued.
Does a company have to get a court order to go into administration?
No, an administrator may be appointed by the court (see paragraph 56.1.16), by the holder of a qualifying floating charge (see paragraph 56.1.26) or by the company or its directors (see paragraph 56.1.37).
What does an administrator do?
The administrator’s aim is to rescue the company as a going concern, achieve a better result for the company’s creditors as a whole than would be possible by liquidation, or to sell the company’s property in order to make a distribution to one or more secured or preferential creditors.
What reports and returns does an administrator make?
The administrator must complete a statement of proposals (see paragraph 56.1.78) which must be sent to the registrar of companies, all known creditors, and all members of the company. The administrator must circulate a report on the initial meetings of creditors (see paragraph 56.1.89).
The administrator sends a progress report (see paragraph 56.1.96) for every six month period from the date of his/her appointment to the date he/she ceases to act. The progress report must be sent to the registrar of companies and the creditors within one month of the end of the period covered by the report.
The administrator must submit a report on the conduct of the directors, shadow directors, etc (see paragraph 56.1.98). The official receiver should check ISCIS under the Conduct Assessment tab to see what type of conduct report has been submitted by the administrator.
What is a pre-pack administration?
A pre-pack administration is where the sale of the insolvent company's business and/or assets has been agreed prior to the application for administration. The sale is then made immediately upon the appointment of the administrator (see paragraph 56.1.107).
How does an administration end?
The administration ends automatically after 12 months unless the administrator applies to the court prior to this date for an extension. Where the objective has been achieved prior to this date the administrator may apply to the court for the administration to end (see paragraphs 56.1.104, 56.1.105 and 56.1.106).
What happens when a winding-up order is made against a company previously in administration?
The duties of the official receiver remain broadly the same. The official receiver should investigate the company’s cause of failure and it’s affairs generally, hold a first meeting of creditors, and prepare a disqualification report, where appropriate (see paragraph 56.1.129).
What documents should the official receiver expect to retrieve from the administrator?
The official receiver should obtain from the administrator
The administrator’s disqualification D return can be found under the Conduct Assessment tab in ISCIS.
What should the official receiver be looking for?
The official receiver should be looking to identifying the assets and liabilities of the company at the date of the administration, details of the realisation of the companies assets, if any, and how the funds received were distributed. The official receiver should be aware that the assets and/or business of the company may have been sold at an undervalue (see paragraphs 56.1.135 and 56.1.137).
What are the time limits for submitting a disqualification report?
An application for a disqualification order should be made within two years from the date of the administrator’s initial appointment. The leave of court is required to bring disqualification proceedings outside this limit.
What is the commencement date if the company goes into compulsory liquidation?
The commencement date is usually the date of presentation of the petition. Where the court makes an order for the winding up for the company as a result of an application for an administration order the commencement date is the date of the winding-up order (see paragraph 56.1.20).
However the relevant date for preferential creditors is the date of the administration order or the date the company entered administration (see paragraphs 51.1.134).
The relevant date from which the official receiver may investigate preferences and transactions at an undervalue is the date of the administration application, the date a notice of intention to appoint an administrator was filed at court or the date on which the company entered administration (see paragraph 56.1.135)
What remuneration and expenses can the administrator claim and when are they paid?
The administrator is entitled to remuneration. The remuneration is generally set according to one of three principles: a percentage of the assets dealt with, payment for time spent on the administration by the administrator and his/her staff or a set amount. Paragraphs 56.1.115, 56.1.116 and 56.1.117 provide further details on the calculation of the administrator’s remuneration.
The administrator is entitled to the payment of his/her expenses which are a first charge on the assets of the company. The administrator’s remuneration is an expense of the administration and is paid before any distribution to creditors (see paragraph 56.1.124 for further details).