The Enterprise Act 2002 introduced procedures to streamline the process of placing a company into Administration. Banks are now not normally able to appoint an Administrative Receiver. The appointment of an Administrator is particularly appropriate when the company is insolvent and the directors might be liable under the wrongful trading provisions if the company was to continue trading without the protection of an Administration Order. This frequently occurs when it has not been possible to enter into an informal agreement with creditors
An Administrator can be appointed by the directors without the necessity of obtaining a court order. This has not only shortened timescales but also significantly reduced costs.
An Administrator of a company must perform his functions with the objective of:
1. Rescuing the company as a going concern or
2. Achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration), or
3. Realising property in order to make a distribution to one or more secured creditors or preferential creditors.
The appointment of an Administrator protects the company against action being taken by creditors. The licensed insolvency practitioner acting as the Administrator will immediately stabilise the financial position of the company and then assess his strategy, working, wherever possible, with existing management. Whilst the result of an administration could be the sale of the company or perhaps sale of the business, it is also possible to enter into a Company Voluntary Arrangement out of an Administration.
There are occasions when it is not possible for the Administrator to save the business as a going concern and he has to sell the business or assets of the business. An Administrator can now file a notice with the Registrar of Companies to move the company from an Administration process to a Creditors Voluntary Liquidation without the shareholders passing resolutions. The Administrator will normally become Liquidator.
If the Administration does not come to an end in this way, it is terminated automatically one year after commencement of the Administration (unless the Administrator makes an application for an extension) or upon the objective of the Administration order being achieved.
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