Administration is managed by an administrator, who is an authorised insolvency practitioner appointed to manage the affairs, business and property of a company. He/she will be an officer of the court and must perform his/her functions with the objective of rescuing the company wherever possible.
The Enterprise Act 2002 revised the administration procedure. The revised administration procedure puts rescue at the heart of the administration - where companies can be saved, they should be saved. The first objective of the administrator must be to consider rescuing the company. This means rescuing the company as a going concern with all or most of its businesses intact - it does not mean ending up with the legal shell of the company. This new emphasis on company rescue in administration will help to ensure that viable companies are preserved and jobs are safeguarded.
Administration effectively protects the company from any action by creditors to recover money for a limited period, e.g. a creditor cannot petition for the winding up of a company whilst it is in administration.
Purpose of Administration
There are three objectives -
• Company rescue (as a going concern) being primary.
• If that is not possible (or if the second objective would clearly be better for the creditors as a whole), the administrator can achieve a better result for the creditors than would be obtained through an immediate winding-up of the company, possibly by trading on for a while and selling the business/businesses as a going concern.
• Only if neither of these objectives is possible, can he realise property (sell assets to somebody) to make a distribution to secured and/or preferential creditors.
In addition to the court order entry into administration, the Enterprise Act 2002 introduced an ‘out of court’ appointment route for holders of qualifying floating charges and companies/directors that is quick and does not need a court application or hearing. The administrator is still an officer of the court and the relevant documents are filed with the court, but the appointment is effective from the date and time that a notice of appointment is filed with the appropriate court.
Companies and directors can only appoint an administrator through the relevant "without court order" route if the company has not had the benefit of a moratorium (or interim moratorium) within the previous 12 months. This prevents administration being used as a quick and easy way of holding off creditors whenever things get difficult.
Time limits
The Enterprise Act 2002 introduced an overall time limit of one year for an administration, although this can be extended by the consent of the creditors and/or by the court. The administrator is also required to do everything as soon as reasonably practicable and the time-limits for getting his proposals out to creditors, and holding the initial creditors' meeting are eight and 10 weeks respectively, although these can also be extended with the creditors' consent and/or by the court.
Endings
The Enterprise Act introduced specific, finite endings, which enable the administrator to move the company from administration straight into a creditors' voluntary liquidation (where there are assets to be distributed to unsecured creditors) or to dissolve the company (where it has no property left to distribute to creditors), on the registration of the relevant notice by Companies House.
