Administration and Receivership Flashcards
What is administration?
A collective procedure aiming to rescue a company or maximise creditor returns
What is receivership?
An enforcement procedure used by secured creditors to recover debts
What does going into administration protect the company from?
Legal action via a statutory moratorium
What are the statutory objectives of administration in order?
1) Rescue the company as a going concern
2) Achieve a better result for creditors than liquidation
3) Realise company assets to pay secured/preferential creditors
Who must an administrator be?
Licensed insolvency practitioner
What are the two routes for appointment of administrator?
1) Court procedure
2) Out-of-court procedure
Who can appoint an administrator out of court?
- Directors
- Qualifying floating charge holder
Who can apply for administrator via court?
- Company
- Directors
- Creditor
- Supervisor of CVA
- A liquidator
What are key requirements for appointing an administrator?
- The company must be unable to pay its debts
- Court must be satisfied that administration is likely to achieve its purpose
What is the process in applying for administrator through court?
1) Application filed in court
2) Interim moratorium applies
3) Court hearing and order
4) If granted, administrator is appointed
What is the process in appointing administrator out of court?
1) File a Notice of Intention to Appoint
2) Notify secured creditors
3) Wait 5 business days
4) If no objection, file Notice of Appointment and administrator is appointed
What is the role of an Administrator?
- Acts in interests of all creditors
- Take full control of company
- Directors remain in office but lose management powers
What are the key powers of an Administrator?
- Continue trading business
- Sell assets
- Remove and appoint directors
- Bring legal claims
What is the default administration period?
12 months
How long does an administrator have to submit a rescue plan?
8 weeks
What is pre-packed administration?
Involves selling business immediately after an administrator is appointed (even to the directors)
What are the types of receivership?
1) Administrative receivership
2) Fixed charge receivership
3) Court-appointed receivership
Who can appoint administrative receivership?
Qualifying Floating Charge Holders (if created before 15 September 2003)
What are key features of administrative receivership?
- Receiver takes control of all assets
- Sells assets to repay debts
- Directors lose control, but company does not enter liquidation
What is a fixed charge receivership?
Secured lenders appoint receiver
What are key features of fixed charge receivership?
- Receiver manages and sells charged asset
- Acts only for secured lender
- Director keeps control over rest of business
- No need for receiver to be licensed insolvency practitioner
What is a court-appointed receivership?
Court appoints a receiver
What is the difference of administration and receivership?
Administration is for all creditors and aims to rescue company. Receiver is meant for the single secured lender only.
