6.2 Administration - objectives and commencement Flashcards
When does a company enter administration?
Para 1 Sch B1
A company enters administration when the appointment of an administrator takes effect
A company is “in administration”while the appointment of an administrator takes effect
What are the statutory objectives of administration?
a) rescuing the company as a going concern
b) 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)
c) realising property in order to make a distribution to one or more secured or preferential creditors
What is the hierarchy of objectives?
MUST seek objective (a) unless either:
Not reasonably practicable to achieve that objective, or
Objective (b) would achieve a better result for the company’s creditors as a whole
MAY seek objective (c) only if:
Not reasonably practicable to achieve either of objectives (a) or (b), and
Does not unnecessarily harm interests of creditors as a whole
What are the three routes to appointment in an administration?
By the Court
* By application
* To the same court
as liquidation
Out of Court by QFCH
* In hours or out of hours
* With notice to company and prior QFCH
Out of Court by company or directors
* In hours only
* With notice to QFCHs
* Without notice if no QFCHs
Who can apply to court to appoint an administrator?
the company
directors, or
one or more creditors (includes QFCH)
liquidator
Supervisor of CVA
FCA or PRA
Or combination of above
Who can appoint an administrator other than by application to the court?
holder of a qualifying floating charge (‘QFCH’)
company or directors
What must statement of proposed administrator include? (need for all 3 routes)
Details of the company
Certificate that IP qualified to act
Consent to act
Statement as to whether the IP had any prior involvement with company and if so a summary
Statement that proposed administrator is of opinion that the purpose of administration is reasonably likely to be achieved in that particular case
In which court must an application for administration be made?
Applications must be listed before a High Court or Insolvency and Companies Court Judge
Applications will invariably be made to the High Court
Exceptionally, before a District Judge sitting in a District Registry of the High Court
Onlywithpermission
Companies whose registered address within the previous 6 months is a London address, the petition must always be lodged at the High Court
When must inability to pay debts be evidenced? (Court route)
Application by QFCH –court can grant application WITHOUT evidence company is unable to pay its debts
ALL other applicants must show:
company is or is likely to become unable to pay its debts
administration is reasonably likely to achieve its purpose
What is the application process for court appointment?
The application must be filed with the court together with:
a witness statement in support; and
the proposed administrator’s consent to act
The court must fix a venue for the hearing of the application
The applicant must file a sufficient number of copies to be sealed by the court
Once served, applicant must file a statement of service
Who must be served with notice of court application?
AS SOON AS REASONABLY PRACTICAL after the making of an administration application the applicant shall notify
any person who has appointed an administrative receiver of the company,
any person who is or may be entitled to appoint an administrative receiver of the company,
any person who is or may be entitled to appoint an administrator of the company
PLUS:
Any administrative receiver
provisional liquidator
The company, if the application is other than by the company or its directors
Any supervisor of a CVA
The proposed administrator
The FCA/ PRA (if applicable)
NB - NOT ORDINARY CREDITORS!
What are the court’s powers on hearing application for administration?
make an administration order
including naming a different IP on application of QFCH
dismiss the application
adjourn hearing conditionally or unconditionally
make an order it thinks appropriate
*treat application as a winding up petition
make an interim order
When is the effective time of appointment (court application)
Appointment is at the time specified in the court order or otherwise, when the order is made
A copy of order is evidence of the appointment
Note:
Administration “commences”on the appointment of an administrator, not the presentation of the application
What are the applicant‘s/ OH’s responsibilities when order made?
Court sends 2 copies to applicant
Applicant must deliver one copy to the administrator(s) as soon as reasonably practicable
The administrator must notify Registrar of Companies WITHIN 7 DAYS
And ASARP:
The company
The creditors
Advertise in the gazette
Any existing receiver or insolvency officer holder
What is a qualifying floating charge? QFC
a charge that contains the right to appoint an administrator or administrative receiver
What is a QFCH?
holder of one or more QFC’s over the whole, or substantially the whole, of the property of the company
What are the requirements prior to the appointment of an administrator by a QFCH?
Floating charge must be enforceable
24 hour demand for payment
No requirement for QFCH to demonstrate the company is insolvent
When can’t a QFCH
A: use out of court route
B: Appoint an administrator
A: QFCH cannot use out of court route if a provisional liquidator or an administrative receiver has been appointed
B: Cannot appoint where the company is in liquidation or administration already
What is the out of court process by a QFCH where NO prior QFCH?
Files 3 copies notice of appointment
Court seals and returns 2 copies
What is the out of court process by a QFCH where PRIOR QFCH?
2 days notice of intention to appoint to
Court
Prior QFCH
Prior QFCH holder can object/ appoint own administrator
After 2 BUSINESS DAYS (if no objection), QFCH making the application
files 3 copies of notice or appointment
Court seals and returns 2 copies
When does an interim moratorium come into effect? (Out of court by QFCH case)
Filing the notice of INTENTION TO APPOINT with court provides an interim moratorium until the earlier of
Notice of appointment being filed
The EXPIRY OF 5 BUSINESS DAYS from the filing of notice of intention without
an administrator being appointed
Once 2 business days have elapsed or consent of prior QFCH received, may proceed with appointment
What must a notice to appoint by QFCH contain?
A statutory declaration that:
The appointor is entitled to appoint [and give details of their charge]
That none of the restrictions on making an appointment apply
Either:
A statement that 2 business days have elapsed since notice given to prior QFCH(s); or
Prior QFCH(s) have been served notice of intention and consented in writing; or
Prior QFCH(s) have consented in writing without notice having been given; or
The are no prior QFCH(s)
Statutory declaration must be made NOT MORE THAN 5 BUSINESS DAYSprior to filing
What documents must be filed at court with notice of appointment of an administrator?
Statement by proposed administrator
Division of duties, if joint administrators
Plus (or next day if out of court hours by fax or e-filing)
Principle documents
Fax transmission report/ hard copy email submission
Reasons for out of court appointment
What is the effective time of appointment where out of court by QFCH?
Appointment effective from TIME FORMS FILED IN COURT and a certified copy of notice endorsed by court clerk, with the time of its presentation
evidence of commencement of administration
If lodged by fax, effective from date and time of fax
If e-filing, effective at the time of the filing submission email
What notifications are required when out of court appointment by QFCH?
Court sends 2 certified copies of Notice of Appointment to appointor
Appointor must deliver one copy to the administrator(s) AS SOON AS REASONABLY PRACTICAL
With a copy of evidence of out of hour submission, where applicable
The administrator must notify Registrar of Companies WITHIN 7 DAYS
AND ASARP:
The company
The creditors
Advertise in the gazette
Any existing receiver or insolvency officer holder
How is administration initiated by the company or its directors?
Company
Shareholders meeting
Resolution of the members
Directors
Board meeting
Board Minute
What are the restrictions on appointment of an administrator by the company or its directors?
Cannot appoint where the company is in liquidation or administration already
If within last 12 months the company had been in administration and the administrator was appointed by the company or its directors
A petition for winding up has been presented and not yet disposed of
An administration application has been made and not yet disposed of
An administrative receiver is in office
Who must be served with a notice of intention to appoint an administrator by co/ directors?
QFCH
any enforcement agent or other officer who is charged with distress or other legal process against the company
any person who has distrained against the company or its property
any supervisor of a CVA
the company (if the directors are making the appointment)
What is the process for out of court appointment of an administrator by the company or its directors?
Notice of intention must be served on any QFCH
Notice must THEN be filed in the court ASARP
Accompanied by a statutory declaration:
*that the company is or is likely to become unable to pay its debts,
that the company is not in liquidation, and
that, so far as the person making the statement is able to ascertain, the appointment is not prevented by
previous administrator appointed in last 12 months by co/ director/ any other petitions etc outstanding
, and
to such additional effect, and giving such information, as may be prescribed
notice is accompanied by either a copy of the resolution of the company or a record of the decision of the directors to appoint an administrator
Requires the statutory declaration to be made not more than five business days before the notice is filed with the court
What is the process for appointment out of court by directors/ the company if QFCH?
Gives notice of intention to appoint to:
Court
QFCH (can object/ appoint)
If no objection:
After 5 business days / not more than 10 business days:
Files 3 copies of notice of appointment
Court seals & returns 2 copies
What is the process for appointment out of court by directors/ the company if NO QFCH?
Company/ directors file 32 copies of notice of appointment
Court seals and returns 2 copies
What is the position re an interim moratorium where out of court appointment by directors/ company?
Filing the notice of intention to appoint with court provides an interim moratorium until the earlier of
Notice of appointment being filed
*The expiry of 10 business days from the filing of notice of intention without
an administrator being appointed
What must notice of appointment by co or directors contain?
A statutory declaration that:
The appointor is entitled to appoint [whether by company or directors]
.
Where QFCH:
A statement that 5 business days have elapsed since notice of intention to appoint was given to all QFCH(s); or
Each QRCH has consented in writing
WhereNoQFCH:
Statement as to the absence of prior insolvency proceedings
Statutory declaration must be made not more than 5 business days prior to filing
What documentation must be filed for out of court appointment by directors?
Following notice of intention (ie has QFCH): Notice of appointment
Statement by Proposed administrator
Division of duties, if joint administrators
Written notices of consent by QFCH/ or statement that the notice period has expired
No Notice of intent:
Notice of appointment
Statement by Proposed administrator
Division of duties,
if joint administrators
Copy resolution/ Board minute
What is the effective time of appointment - out of court by company or directors?
Appointment effective from time forms filed in court and a certified copy of notice endorsed by court clerk, with the time of its presentation
evidence of commencement of administration
NO out of hours option for company or directors
If e-filing, effective at the time of the filing submission email, if during Court opening hours (10am – 4pm)
Or 10:00 am on the next business day, if submitted outside of Court hours
What notices are required - Out of court by co/ directors?
Court sends 2 certified copies of Notice of Appointment to appointor
Appointor must deliver one copy to the administrator(s) as soon as reasonably practicable
The administrator must notify Registrar of Companies within 7 days
AndASARP:
The company
The creditors
Advertise in the gazette
Any existing receiver or insolvency officer holder
