Module 9 - Administrative Receiverships And CVAs Flashcards
3 Types of Receivership?
Administrative Rceivership;
Fixed Charge Receivership;
Law of Property Act Receivership
Official appointed by a Court or Lender (under the terms of a secured debenture) who takes control of all or substantially all assets of a firm in receivership and is mandated to pay off the firm’s debts without liquidating it.
Administrative Receiver
3 Requirements for Lender to appoint an AR
QFCH;
Have the power to appoint a receiver;
Charge was created before 15 September 2003
4 Differences between AR and Admin
No Moratorium;
AR may contract with personal liability - whereas Administrator is agent of the company;
Not recognised in Europe;
Can’t pursue antecedent transactions
3 Advantages of AR v Administrator
Duty to Lender NOT creditor;
Business Rates & CT payable on asset gain = unsecured claim v expense;
Cheaper and easier to appoint
An equitable charge on all the Company’s assets both present and future, available only to companies, on terms that the company may deal with the assets in the ordinary course of the business.
Floating Charge
In order for an AR to be validly appointed, the charge under which the appointment made must be valid; what makes it valid?
Date of the Charge - before 15/09/2003
Security must be ‘intra vires’ - company was legally able to take out the security;
Valid Board Resolution to request creation of the floating charge;
Charge must be registered within 21 days of its creation at CH
5 Steps to Appointment of Receiver
1 - Company breaches term of loan;
2 - Bank issues demand;
3 - Bank appoints Receiver;
4 - Bank sends Deed of Appointment to IP (specific to AR);
5 - IP Signs and returns deeds by end of new business day
Which law are LPA Receivers appointed under?
Law of Property Act 1925
3 Powers of an LPA Receiver
Insure;
Pay outgoings;
Collect Rent
Common Factors between LPA and Fixed Charge Receivers
Appointed under fixed charge; appointed over security over a fixed asset; appointed to deal with that asset; Do not need to be an IP; appointed by deed; powers and duties outlined in charge document; duty of receiver to person who appointed them
Pre Appointment Considerations for LPA and Fixed Charge Receiverships
Sign an EL;
Agree Fee Position;
Agree an indemnity with Appointer;
Consider ethical risks;
Expertise required?
Is COmpany in Admin (Court consent then required)
Any other charge holders?
Does the charge doc have the powers needed to do the job;
Ensure letter of demand properly issued;
Is the charge valid?
Process for LPA and Fixed Charge Receivers
Document of appointment must be sent to proposed Receiver;
Acceptance must be made by the end of the business day following receipt;
Appointment can be accepted orally;
Ensure Receiver is in a position to accept appointment;
Appointment effective from time that Receiver signs or orally accepts
Steps on Appointment
Notice of appointment must be sent to Companies House within 7 days;
Notify Company of Appointment
Role of LPA or FC Receiver
Recover money for lender,
Take control of asset to protect lender;
Act independently from Bank - not become their agent;
Role of Receiver may not be terminable for Company
Duties of LPA / FC Receiver
Principle duty to lender;
Duty of care to other charge holder;
Duty of care to Guarantors;
Duty of care to pref creditors;
Must act in good faith;
Must achieve best price
Seek an independent valuation;
Must give notice of ceasing to act to Companies House
Must file r&p within one month of anniversary of appointment - 6 months thereafter,
Must account for taxes such as VAT and CIS;
FCR duty to company / debtor
Advantages of a CVA
Continue Trading;
Freeze HMRC debt;
Directors maintain control;
Fixed parameters of operation;
Tax advantages;
Debt forgiveness can be included;
Can be used as a means to restructure;
Forces unpredictable Creditors to be bound by CVA
Disadvantages of CVA
Do or Bust;
No automatic moratorium
No investigations;
members can challenge Creditor decision;
No antecedents transactions can be pursued;
Which SIP governs CVAs?
SIP 3.2
Two Key COmponents of SIP 3.2?
Meet Directors in Person;
Consider other options
Immediate actions required when entering CVA
Call meeting with main creditors;
Work with Directors to contact funding providers
Put Company into ADM? (Would trigger auto Moratorium);
Seek a CVA - small company moratorium;
Pre-pack?
CVA Process
1 - Proposals;
2 - Delivered to IP;
3 - Notice to Nominee;
4 - Statement of Affairs;
(4.5) - Other disclosures;
5 - Statement of Truth
Nominee’s Report
Copy to Company;
Filed in Court;
Proposal;
NOminee’s Report;
Consent to Act;
Comments on the Proposal
Calling Decision of Creditors and Meeting of GM Process
Notice;
Proposals;
Statement of Affairs;
NOminee’s Report;
proxy and Proof;
SIP 9 Guidance
Majority
2 Key Considerations for Calling Meeting
14 CLEAR DAYS;
Proof of Postage;
Meeting held on Business Day
Convenient for Creditors
How many days between Notice and holding meeting of Company in CVA
28 Days
How long between (Maximum) between creditor decision and shareholder meeting?
Max 5 Business days - typically on the same day
How long between decision and report of the outcome?
4 Business Days - Chair’s Report must be logged to Court, Creditor Decision, Members, Registrar
4 Things to be included in Report of OUtomce
Result of Meeting;
Attendance (and voting amount);
Resolutions and Voting;
EC Regs - whether they apply
How long do Creditors have to appeal the Chair’s Report
28 Days
What two grounds can a Creditor appeal on?
Unfair Prejudice;
Material Irregularity
CVA Small Company Moratorium - Qualifying Criterion
Turnover under 10.2 million;
Assets of less than 5.1 million on balance sheet;
Equal to or fewer than 50 employees in relevant period
Additional Qualifying Small COmpany Moratorium Components
Can’t be in Admin (nor in last 12 months);
No outstanding petitions (not in process of winding up);
No AR been appointed;
No CVA already in place;
No provisional Liquidator in place
Effects of a CVA Small Company Moratorium
No petition for winding-up can be presented;
No Administration Order can be presented and No Admin appointed;
Landlords cannot exercise right of forfeiture;
No further steps can be taken to enforce any security or repossess goods;
Company meetings cannot be called without consent of Reciever
How long does Small Company Moratorium last?
28 Days unless extended
CVA Proposals - Components
Desirability - why does Company want CVA?
Assets - whether there are any charges / what can be realised?
Liabilities;
Antecedent or Voidable Transactions
Prescribed Part;
Guarantees;
Duration;
Dividends / Distributions
Remuneration;
Business of the Company;
Supervisor (basics and role and duty and powers)
Default;
Role as Nominee and Supervisor
Which creditors are bound by the CVA
Any who are entitled to vote
Secured Creditors may not vote
What makes a Creditor eligible to vote in a CVA proposal dp?
Written notice of the claim must be given;
Claim must not be secured
