Administration and receivership

• What are the two different procedures considered in administration and receivership?

  Administration and receivership
• What are the objectives of the administrator in administration?

  • Rescue the company as a going concern
  • Achieve a better result for creditors than liquidation
  • Realise the company's property for distribution to creditors
• What is the most common insolvency procedure after liquidation?

  Administration
• What does it mean that administration is a 'collective' procedure?

  The administrator acts in the interests of all creditors rather than a specific creditor
• What law governs administrations in the UK?

  Schedule B1 IA 1986
• Who must be licensed to be appointed as an administrator?

  Licensed insolvency practitioners
• What is the first objective of the administrator according to Sch B1?

  To rescue the company as a going concern
• What happens if the first objective of administration is not reasonably achievable?

  The administrator must then aim to achieve a better result for creditors than liquidation
• What is the third objective of the administrator?

  To realise the company's property for distribution to creditors
• What are the two procedures for the appointment of an administrator?

  1. Court procedure
  2. Out of court procedure
• Who can apply for the court to appoint an administrator?

  The company, directors, a creditor, the supervisor of a CVA, or a liquidator
• What must the court consider when deciding to make an administration order?

  Whether the appointment is reasonably likely to achieve the purpose of administration
• What is an interim moratorium in the context of administration?

  A temporary freeze on creditor action until the administration order is made
• What happens to pending winding up proceedings if the court makes an administration order?

  They are automatically dismissed
• What is the summary of the court procedure for appointing an administrator?

  1. Apply to court
  2. Interim period including interim moratorium
  3. Hearing and order
• What is the summary of the out of court procedure for appointing an administrator?

  1. Company/Directors file NOI & serve QFCH
  2. Wait 5 business days
  3. Appoint and file Notice of Appointment
  4. Administrator appointed!
• What must directors do if they appoint an administrator out of court under Sch B1?

  File a notice of intention to appoint (NOI) at court
• What happens if a QFC holder does not appoint an administrator within 5 business days?

  The directors can file the notice of appointment in the usual way
• What is the role of the administrator once appointed?

  To act in the interests of all creditors and manage the company
• What powers does an administrator have?

  To carry on the business, sell property, borrow money, and execute documents
• What must an administrator do within eight weeks of their appointment?

  Produce a report with proposals for the conduct of the administration
• What happens if the administrator's proposals are rejected?

  The company will usually be placed into liquidation
• What is the time limit for the completion of administrations?

  12 months, with possible extensions
• What is the significance of the interim moratorium?

  It temporarily protects the company from creditor actions
• What is the administrative moratorium in administration?

  • Full moratorium during administration
  • No winding up orders or resolutions
  • No appointment of administrative receivers
  • No enforcement of security over property
  • No legal proceedings against the company
• What powers do administrators have under IA 1986?

  To manage the company's affairs, remove and appoint directors, and dispose of property
• What is a pre-packaged administration?

  • Business and assets prepared for sale before administration
  • Sale agreement negotiated before appointment
  • Sale completed immediately after appointment
• What is a concern regarding pre-packaged sales?

  They may not occur at the proper price and creditors may lack information
• What do the Administration (Restrictions on Disposal to Connected Persons) Regulations 2021 require for pre-packaged sales?

  Approval from creditors or an evaluator's qualifying report
• What happened to Debenhams during its administration?

  • Appointed administrators in May 2020
  • Pursued sale, restructure, and wind-down strategies
  • Brand bought by Boohoo for £55m in January 2021
• What happened to Cath Kidston during its administration?

  • Appointed administrators in April 2020
  • Parent company bought brand through pre-packaged deal
  • Closed all 60 UK stores, later returned to high street
• What is the difference between administration and receivership?

  • Administration: collective procedure for all creditors
  • Receivership: enforcement procedure for a secured creditor
• What are the three types of receivership?

  1. Administrative receivers
  2. Fixed charge receivers
  3. Court-appointed receivers
• What is the role of an administrative receiver?

  To take control of secured assets and repay the secured creditor
• What is the most common type of receivership?

  Fixed charge receivership
• What powers do fixed charge receivers have?

  To enforce security, manage, and sell secured assets
• What is the duty of a court-appointed receiver?

  To run the business until a dispute is resolved
• What is the summary of the administration process?

  • Collective procedure for creditors
  • Administrators are licensed practitioners
  • Directors lose management powers
  • Moratorium protects the company
• What is the summary of receivership?

  • Enforcement procedure for secured creditors
  • Types: administrative, fixed charge, court-appointed
  • Duties primarily to the appointor