Insolvency - administration + receivership Flashcards
What is the primary aim of the objectives in company administration?
- To rescue the company to solvency
- To achieve a better result for the creditors than otherwise
- To realise the property to make a distribution to one or more secure or preferential creditors
Rescue, result, realisation
What interests do administrators act in during the administration process?
Interests of all creditors – collective procedure
Who are administrators in the context of company administration?
Officers of the court
What are the two ways of triggering an administration?
- In court appointment
- Out of court procedure
What is the in-court appointment procedure?
- Company, directors, one or more creditors, the supervisor of a CVA or liquidator applies to the court
- Interim moratorium comes into effect on application and lasts until resolved
Who can initiate the out of court procedure for appointing an administrator?
Company or directors, qualifying floating charge holder
What does QFC stand for in the context of company administration?
Qualifying floating charge - a charge which relates to the whole or substantially the whole of the company’s property or has the power to appoint an administrator or administrative receiver in its document of creation
What must directors do if there is no QFC holder to trigger administration??
File notice of intention to appoint at court and not less than 10 business days later file a notice of appointment at court
What must directors do if there is a QFC holder to trigger administration?
- Send notice to the QFC holder
- QFC has 5 business days to appoint its own choice of administrator
What must a QFC holder do to appoint an administrator out of court?
Enforce security in accordance with terms of QFC and file notice of appointment at court (no need for insolvency)
What must a lower ranking QFC holder do when there are multiple QFC holders but it has used the out of court procedure for administration?
Give 2 business days’ notice to the holders of a QFC which has priority
What powers does an administrator have?
- Power to carry out the business, take possession and sell property, borrow money and execute documents, remove and appoint property, dispose of property subject to a fixed charge (subject to court approval)
- Directors cannot exercise management powers without administrator’s consent
- Once appointed, the administrator has up to eight weeks to produce a report setting out proposals for the future of the company’s business.
Can directors exercise management powers during administration?
No, directors cannot exercise management powers without the administrator’s consent.
What is the time frame for an administrator to produce a report?
Once appointed, the administrator has up to eight weeks to produce a report setting out proposals for the future of the company’s business.
What is the fixed time limit for the completion of administrations?
There is a 12-month fixed time limit for the completion of administrations, although extensions are possible.
What is a moratorium during the period of administration?
During the period of administration, no receiver, order to wind up, steps to enforce security, legal proceedings, or forfeiting of a lease can occur.
What are pre-packaged sales?
Pre-packaged sales are controversial as they aim to protect the goodwill and continuity of the business while achieving certainty of result for creditors.
What are concerns regarding pre-packaged sales?
There is a concern that the sale won’t happen at the proper price.
What restrictions apply to pre-packaged sales?
Pre-packaged sales are restricted unless the sale has been approved in advance by the creditors or the buyer has obtained an evaluator’s qualifying report.
What is Receivership?
Receivership only benefits one creditor.
What is Administrative Receivership?
A rare procedure where a secured creditor with fixed and floating charges over all of the company’s assets may appoint an Administrative Receiver (AR).
The AR takes control of the secured assets, sells them, and uses proceeds to repay debts to creditors.
What are Fixed Charge Receivers?
Fixed Charge Receivers are appointed to enforce the security and recover the debt that is owing to their appointor.
They do not have to be licensed insolvency practitioners and owe their duties primarily and exclusively to the appointer.
What are Court Appointed Receivers?
Court Appointed Receivers are relatively rare and are appointed by the court, with powers and duties set out in a court order.
They are often appointed under the Proceeds of Crime Act.
