17 - Corporate Rescue

• The rules of administration are found within the Insolvency Act 1986
• The objectives of the administrator are:

  1.     Rescuing the company as a going concern

  2.     Achieving a better result for the company’s creditors as a whole than would be likely if the company was wound up

  3.     Realising property in order to make a distribution to one or more secured or preferred creditors
• Administrators have considerable discretion. Objective 1 is rarely pursued and the most common outcome is that the business of the company is sold and the company dissolved, which is Objective 2.
• A company enters administration when the appointment of its administrator takes effect.
• An administrator must be a qualified insolvency practitioner.
• An administrator can be appointed by:

  ·         The Company or its directors;

  ·         A qualifying floating chargeholder; or

  ·         The Court
• Notice of the appointment of administrator must be filed with the Court, along with the specified documents.
• the holder of a qualifying floating charge over the company's property can appoint an administrator.
• The court can only make an administration order following the application to the court which can only be made by specified persons, including:

  ·         The company, its directors or creditors (or a combination of these);

  ·         The supervisor of a CVA;

  ·         The liquidator of the company; or

  ·         The FCA.
• The effects of administration are:

  ·         Dismissal of winding up petitions

  ·         Dismissal of receivers

  ·         Moratorium on insolvency proceedings

  ·         Moratorium on other legal processes

  ·         Interim Moratorium

  ·         Exercise of managerial powers by the directors suspended

  ·         Publicity of the administration
• Within 8 weeks of appointment, the administrator must make a statement setting out the proposals for achieving the purpose of administration. The statement must be sent to the Registrar, every creditor and every member.
• A pre-pack is an arrangement under which the sale of all or part of a company’s business or assets is negotiated with a purchaser prior to the appointment of an administrator and the administrator effects the sale immediately on, or shortly after, appointment.
• A company voluntary arrangement (CVA) is a binding agreement between a company and its creditors. It is an insolvency procedure used by insolvent companies to try and rescue their business.
• The CVA must be approved by the company and its creditors.
• The CVA can be challenged within 28 days of notice of the meeting of the CVA being given to the court
• Administration is more popular than a CVA as administration comes with the benefit of Moratorium.
• Any company can obtain a moratorium, except those listed in schedule ZA1 (currently subject to a moratorium or insolvency procedure within the last 12 months).
• A person known as the 'Monitor' is appointed to monitor the company's affairs for the purpose of forming a view as to whether it remains likely that the moratorium will result in the rescue of the company as a going concern.
• A moratorium will expire following the expiration of the initial 20 day period or if extended, the extension period.