6.2 Administration - objectives and commencement

Question 1

When does a company enter administration?

Answer 1

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

Question 2

What are the statutory objectives of administration?

Answer 2

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

Question 3

What is the hierarchy of objectives?

Answer 3

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

Question 4

What are the three routes to appointment in an administration?

Answer 4

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

Question 5

Who can apply to court to appoint an administrator?

Answer 5

the company
directors, or
one or more creditors (includes QFCH)
liquidator
Supervisor of CVA
FCA or PRA

Or combination of above

Question 6

Who can appoint an administrator other than by application to the court?

Answer 6

holder of a qualifying floating charge (‘QFCH’)

company or directors

Question 7

What must statement of proposed administrator include? (need for all 3 routes)

Answer 7

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

Question 8

In which court must an application for administration be made?

Answer 8

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

Question 9

When must inability to pay debts be evidenced? (Court route)

Answer 9

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

Question 10

What is the application process for court appointment?

Answer 10

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

Question 11

Who must be served with notice of court application?

Answer 11

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!

Question 12

What are the court’s powers on hearing application for administration?

Answer 12

 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

Question 13

When is the effective time of appointment (court application)

Answer 13

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

Question 14

What are the applicant‘s/ OH’s responsibilities when order made?

Answer 14

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

Question 15

What is a qualifying floating charge? QFC

Answer 15

a charge that contains the right to appoint an administrator or administrative receiver

Question 16

What is a QFCH?

Answer 16

holder of one or more QFC’s over the whole, or substantially the whole, of the property of the company

Question 17

What are the requirements prior to the appointment of an administrator by a QFCH?

Answer 17

Floating charge must be enforceable
 24 hour demand for payment

No requirement for QFCH to demonstrate the company is insolvent

Question 18

When can’t a QFCH

A: use out of court route

B: Appoint an administrator

Answer 18

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

Question 19

What is the out of court process by a QFCH where NO prior QFCH?

Answer 19

Files 3 copies notice of appointment

Court seals and returns 2 copies

Question 20

What is the out of court process by a QFCH where PRIOR QFCH?

Answer 20

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

Question 21

When does an interim moratorium come into effect? (Out of court by QFCH case)

Answer 21

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

Question 22

What must a notice to appoint by QFCH contain?

Answer 22

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

Question 23

What documents must be filed at court with notice of appointment of an administrator?

Answer 23

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

Question 24

What is the effective time of appointment where out of court by QFCH?

Answer 24

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

Question 25

What notifications are required when out of court appointment by QFCH?

Answer 25

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

Question 26

How is administration initiated by the company or its directors?

Answer 26

Company
Shareholders meeting
Resolution of the members

Directors
Board meeting
Board Minute

Question 27

What are the restrictions on appointment of an administrator by the company or its directors?

Answer 27

 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

Question 28

Who must be served with a notice of intention to appoint an administrator by co/ directors?

Answer 28

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)

Question 29

What is the process for out of court appointment of an administrator by the company or its directors?

Answer 29

 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

Question 30

What is the process for appointment out of court by directors/ the company if QFCH?

Answer 30

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

Question 31

What is the process for appointment out of court by directors/ the company if NO QFCH?

Answer 31

Company/ directors file 32 copies of notice of appointment

Court seals and returns 2 copies

Question 32

What is the position re an interim moratorium where out of court appointment by directors/ company?

Answer 32

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

Question 33

What must notice of appointment by co or directors contain?

Answer 33

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

Question 34

What documentation must be filed for out of court appointment by directors?

Answer 34

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

Question 35

What is the effective time of appointment - out of court by company or directors?

Answer 35

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

Question 36

What notices are required - Out of court by co/ directors?

Answer 36

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