Chapter 16 - Implementation of administration Flashcards
Administration - advantages of trading on for the longer term
- facilitates a going concern sale which should realise more assets than a forced sale
- minimises bad publicity caused by closures and job losses
- if the IP’s continued trading is profitable, this will enhance the floating charge realisations
Within what time period must an administrator decide whether or not he wants to retain employees?
Within 14 days of appointment
After this time period he will be deemed to have adopted the employee contracts and ongoing wages will be expense of liquidation.
What is the statutory notice periods for employees being dismissed?
What is the maximum?
Worked for 1 month to 2 years = 1 week
Then add a week for every year of service
so 2-3 years = 2 weeks
3-4 years = 3 weeks
Up to a maximum of 12 weeks
How long does an employee need to have worked for to claim redundency?
Continued employment for a period of two years
What element of employees pay is preferential?
Arrears of wages restricted to 4 months pre-relevant date. Max £800 per employee
All holiday pay is preferential
Employee contributions in the 4 months prior to relevant date
What SIP deals with sales to directors?
SIP13
What is a pre-pack administration?
Involves agreeing the sale of the business before the company enters into liquidation.
This allows the sale of the business to be completed immediately after administration is effected and should give best deal for creditors.
Who does the IP need to inform regarding a SIP16 pre-pack?
Their RPB (rather than the insolvency service)
Administration - When should a sale to a connected party be notified to creditors?
Be provided in first notification to creditors and within 7 calendar days of the transaction.
Administration - when a pre-packaged sale has been undertaken, when should the administrator seek the requisite approval of proposals?
As soon as practical after appointment
Administration - priority of payments (waterfall) to creditors
Fixed charge assets
1 costs of preserving and realising asset
2 fixed charge holder
Floating charge assets:
1 costs of preserving and realising asset
2 liabilities for wages/employees adopted by admin
3 admins remuneration an expenses
4 preferential creditors
5 where floating charge on or after 15 Sept 03 a prescribed part must be paid to unsecured creditors
6 floating charges
7 any surplus to unsecured
True or false - an administrator can only realise fixed charge assets with the consent of the charge holder or court
True
What are the exit routes out of administration?
Handing back to directors
Petition for winding up
File for CVL
File for dissolution (only when all realisations distributed)
Obtaining creditors approval for CVA
Allowing admin to lapse through expiry of 12 month fixed period
Apply to court to end administration
Can an administrator petition for a compulsory winding up
Yes
When can an administrator file to place a company into a creditors voluntary liquidation?
The total amount which each secured creditor of the company is likely to receive has been paid or set aside.
A distribution to the unsecured creditors will be made over and above the prescribed part.
If an administrator wants to put the company into a CVL, does that need to be a:
BM
SH
Creditors meeting
No
Can an administrator disclaim onerous property?
No
If an administrator files for CVL when is the relevant time calculated from?
Relevant time will be calculated from commencement of the administration not from the resolution to wind up
Can an administrator bring claims against directors for misfeasance?
No
Can an administrator bring claims against directors for wrongful or fraudulent trading?
YES
Administration - is sanction of the court needed to make payment to:
Secured creditors
Preferential creditors
Unsecured creditors
Secured creditors - no
Preferential creditors - no
Unsecured creditors - if over and above the prescribed part
Once filed at companies house to dissolve company, when is the company deemed dissolved?
3 months later
Can the supervisor of a CVA challenge antecedent transactions?
No
Does the supervision of a CVA have power to enforce directors co-operation under S234 and S237?
No
Can supervisors of CVA disclaim onerous property?
No
Can supervisors of CVA bring actions under misfeasance, wrongful trading or fraudulent trading?
No
How long can creditors extend an administration for?
and what creditors can give consent?
Can extend for a maximum of 12 months (up from 6 since SBEEA 2015) - they can only extend it once.
Where there will be a distribution to unsecured creditors (over prescribed part), consent can be given by:
- each secured creditor (unanimous) plus
- more than 50% of the unsecured creditors
If only prescribed part being paid:
- Ask secured (unanimous)
- and Prefs (need 50%)
How long can a court extend an administration for?
Indefinitely
When must an administrator apply to court for an extension by?
Not less than 1 month before the administration comes to an end
When must the final administrators report be filed by and to where?
Filed with court and registrar of companies within 5 business days of the end of the admin
Administration is approved for extension, who do they need to tell and in what time limit?
Court, CH and creditors
As soon as reasonable practicable
Administration - if you ask court for an extension, can you then ask creditors for an extension?
No
