Live Session 1 - Effects of Admin and Duties of Administrator

Question 1

What are the effects of Administration

Answer 1

1. Any admin receiver will vacate office
2. Receivers, other than admin receivers, will vacate office
3. No resolution may be passed to wind up the company
4. No order may be made to wind up the company
5. No steps may be taken to enforce security unless have permission of administrator or court
6. No steps may be taken to repossess goods under HP agreement, chattel lease or ROT Agreement
7. Landlord may not exercise right of forfeiture be peaceable re-entry unless administrator or court consents
8. No legal process may be initiated or continued against the company without the consent of the administrator or court

Question 2

What is the status of the administrator

Answer 2

Administrator is an officer of the court and owes a responsibility to all creditors and the court.

The administrator must act fairly and impartially and perform his duties as quickly and efficiently and as is reasonably possible.

Question 3

What is the primary duty of the administrator

Answer 3

To perform his functions with the objectives of the administration in mind -

1. To rescue the company as a going concern
2. To achieve a better return for creditors than would be achieved in a winding up
3. To realise property and to settle one or more secured or preferential claims.

Administrator owes a duty to all creditors, unless only secured or preferential will be paid

Question 4

What other duties does the Administrator have

Answer 4

1. Owes a duty to the company and general body of creditors - and not to any one creditor.
2. On appointment must take custody and control over all property.
3. Manage the affairs, business and property of the company in accordance with objectives of proposal to achieve objective of administration
4. Must comply with Court directions
5. Must comply with SIP2 investigations by officer holders
6. Must submit return on directors conduct within three months of appointment

Question 5

What are the specific duties an administrator must do on appointment

Answer 5

1. Publicise appointment
2. Request a Statement of Affairs
3. Prepare proposal
4. Creditors’ decision process
5. IP Case Record
6. Reporting

Question 6

How, where and to whom does an administrator publicise his appointment

Answer 6

1. Gazette - Publish ASARP
2. Registrar - Within 7 days of receipt of sealed copy

The administrator must also give notice to the following 7 parties:

1. The Company
2. All known Creditors
3. Creditors who have distrained against company property
4. CVA Supervisor
5. High Court Enforcement officers charged with executing order against company property
6. Admin Receiver or other receiver
7. Winding up petitioner & provisional liquidator

In exam consider who else is in the story.

Question 7

What is the process for requesting a Statement of Affairs

Answer 7

Administrator requests SoA from relevant person ASARP following appointment.

Relevant person has 11 days from date of request to provide the SoA to administrator

Administrator may extend period or revoke demand for SoA

Administrator may ask another relevant person for a Statement of Concurrence verified by a Statement of Truth

SoA does not need to be filed at Court but does need to be filed with Registrar ASARP.

Expense of preparing an SoA is an expense of the administration

Question 8

Who is a relevant person

Answer 8

Persons who are or have been officers of the company or those who in the previous year have been promoters, officers or employees of the company

Question 9

Can the administrator limit disclosure of SoA

Answer 9

Where the disclosure of the SoA is likely to:

1. Be prejudicial to the conduct of the administration
2. Reasonably likely to to lead to violence against any person

The administrator can apply to court for order of limited disclosure. Court can order that all or part of the SoA does not need to be filed with the Registrar.

The administrator has a duty to apply to Court when circumstances change that limiting disclosure is no longer necessary.

Creditors have the right to appeal to Court to compel disclosure

Question 10

What is the purpose of the administrators proposal and when does it need to be completed

Answer 10

Proposal must set out how the purpose of the administration is going to be achieved.

If purpose is to realise property and settle one more secured or preferential creditors the proposal must say why the administrator does not think that the company can be rescued as a going concern or why it may not result in a better return than a winding up.

Proposal must be completed ASARP and within 8 weeks of appointment.

Creditors must be given at least 14 days notice of creditor decision process and proposal must be voted on within 10 weeks of appointment.

Question 11

Who should proposal be sent to

Answer 11

All known creditors.

Proposal must also be sent to members. This can be done by publishing notice in a newspaper providing an address to which members can write to apply for a copy of the proposal

Question 12

When is it not necessary to seek creditor approval for proposals

Answer 12

1. Creditors will be paid in full
2. There will be no distributions to creditors
3. The only payment to unsecured creditors is from the prescribed part.

Question 13

What options does the administrator have to obtain creditors decision

Answer 13

1. Deemed consent process
2. Qualifying Decision Making Process

The proposal must be accompanied by a notice to creditors of the decision procedure

Question 14

What must be included if using deemed consent procedure

Answer 14

1. Identification details for proceedings
2. Name of administrator
3. Date administrator was appointed
4. Date on which statement of proposals delivered to creditors

Question 15

What else should be done at initial creditor decision making process

Answer 15

Creditors should be invited to decide whether a creditors’ committee should be established and to invite nominations.

Date that nominations must be received by should be included in notice.

Statement that nominations can only be accepted if administrator is satisfied that a creditor is eligible

Question 16

What is the deadline for votes if holding a virtual meeting

Answer 16

Deadline is 4.00pm the business day before the virtual meeting for claims and proxies.

Chair of meeting has discretion to accept proofs later.

Question 17

What is the deadline if deemed consent or other procedure is used

Answer 17

The day of the creditors’ decision date

Question 18

How is a claim valued by the administrator

Answer 18

Take the full value of their claim as at the date of appointment, less any amounts that can be set off, less any amounts paid to the creditor in respect of the debt since.

Question 19

How are HP, Chattel lease and conditional sale agreement creditor claims valued

Answer 19

Their claim consists of any amounts due and payable as at the date of administrationl

Question 20

How are unliquidated/ unascertained claims treated

Answer 20

A creditor shall not vote in respect of unliquidated or unascertained claims unless the chair agrees to put upon the debt an estimated minimum value to allow them to vote.

Claim should be estimated as at date of appointment, but administrator should take into account events between date of appointment and date of creditor decision process.

Question 21

What if administrator questions validity of creditor claim

Answer 21

The administrator can require the creditor to:

1. Provide additional supporting documents to support claim
2. All creditor to vote marking the claim as rejected
3. Reject claim

Creditor has right to appeal against administrator’s decision within 21 days of decision date.

Question 22

Can a creditors meeting be adjourned?

Answer 22

A creditors meeting can be adjourned more than once so long as it is held within 14 days of the original meeting.

Creditors who did not prove in time for the first meeting may prove their claim at an adjourned meeting. Deadline is 4.00 pm the business day before the meeting unless the chair accepts otherwise.

Question 23

To whom should the creditors decision be reported to

Answer 23

Administrator needs to report the outcome of the creditor’s decision making process ASARP to the following:

1. Every creditor of the company
2. Everyone who received notice of the proposal
3. The Court - accompanied by copy of the proposal
4. The Registrar
5. Any creditor who did not receive notice of the meeting and whose claim the administrator has subsequently become aware of.

Question 24

What happens if proposal is rejected by creditors

Answer 24

The Court may:

1. Order that administrator’s appointment will end on set date
2. Make an interim order
3. Adjourn the hearing conditionally/ unconditionally
4. Make an order on a petition for winding up if it had been suspended due to QFCH making appointment of administrator
5. Make any other order as the Court thinks fit.

Question 25

What needs to be kept in an IP Case Record

Answer 25

Requirements changed in 2015. Now only need to maintain details of material matters that relate to the case.

There are no express guidelines on what an IP should consider to be a material matter

Question 26

Reporting requirements (summary - more details later)

Answer 26

Administrator is required to report and provide a statement of receipts and payments to the following:

• Creditors
• Court
• Registrar

Within one month of 6 month period following appointment.

Question 27

What is the summary timeline of key events following appointment of adminisitrator

Answer 27

1. Publicise appointment with Registrar
2. Publicise appointment in Gazette ASARP
3. Give notice of appointment to other parties - ASARP
4. Request SoA from relevant person ASARP
5. Relevant person has 11 days to provide SoA from date of request
6. File SoA with Registrar ASARP after receipt
7. Create proposal - ASARP but within 8 weeks
8. Creditor decision process - given 14 days notice by proposal, but within 10 weeks.
9. Notify Court, Creditors, Registrar ASARP after creditor decision making process takes place
10. Submit return on directors conduct within 3 months
11. Progress report - submit to Court, Creditors, Registrar within one month of 6 month period following appointment

Question 28

What are the powers of the administrator

Answer 28

1. To do anything necessary or expedient for the management of the affairs, business and property of the company
2. Powers listed in schedule I - i.e to manage and trade the business of the company
3. Remove director of the company and appoint new directors
4. Call meetings of members or creditors
5. Apply to Court for directions
6. Make a distribution to secured or preferential creditors and (with court permission) unsecured creditors
7. Dispose of floating charge assets as though they are not subject to charge.
8. Apply to court for order authorising the disposal of goods under an HP Agreement
9. Bring actions against directors and others
10. Enforce compliance of directors and others
11. Require continued supply from utilities
12. Bind the company to contracts with 3rd parties

Question 29

What do you need to remember about bonding

Answer 29

Administrator should bond for the value of assets which are available for unsecured creditors - remember that unsecured includes preferential creditors in this regard and that prefs are paid out of floating charge assets.

Total assets
- Payable to fixed charge
- Payable to floating charge
- assets held in trust 
\+ Payable to prefs from floating charge assets

Question 30

What are some of the advantages to a bank of appointing an administrator rather than administrative receiver

Answer 30

1. If bank’s floating charge was created after 15 September 2003 then administration is the only choice as they can’t appoint admin receiver.
2. Quick and easy to appoint
3. Less reputational risk for bank - administration is seen as a rescue rather than pulling the plug
4. Administrations are recognised under EC regulations
5. Benefit of a moratorium
6. Administrator has powers to trade and manage the business
7. No potential liability to indemnify the administrator
8. Bank will retain priority over charged assets solds. Fixed charge assets can only be sold with the banks consent.

Question 31

What are directors responsibilities pending appointment of administrator

Answer 31

1. Principal duty is owed to creditors
2. Do not prejudice position of creditors
3. Ongoing creditors should be paid on time if decision is made to continue trading
4. Preserve value of assets
5. No asset sales below market value
6. Reduce trading losses
7. Prepare cashflow forecasts and profit/ loss accounts to support decision to trade
8. No payments to existing creditors - only pay if must
9. Keep customer deposits separate
10. Do not pay into an overdrawn bank account
11. Avoid hauliers who may be owed money
12. Take professional advice
13. Document all major decisions
14. Do not resign

Question 32

What are the risks directors face by not fulfilling their responsibilities

Answer 32

1. Wrongful trading
2. Liable to contribution to assets of the company guilty
3. Disqualification from acting as a Director
4. 2-15 years in prison
5. Fraudulent trading
6. Criminal prosecution
7. Liable for compensation for antecedent transactions if found guilty