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In administration and administration orders - Cases beginning on or after 15 September 2003: In administration
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In administration and administration orders

The current law concerning administration was introduced with effect from 15 September 2003. Under this regime, a company will usually be described as being ‘in administration’ – under the old regime a company would be described as subject to an ‘administration order’.

What follows is a brief outline of the process of administration: it is not a complete statement of the law.

1. What is ‘in administration’?

Administration is when a person, ‘the administrator’, is appointed to manage a company’s affairs, business and property for the benefit of the creditors. The person appointed must be an insolvency practitioner and has the status of an officer of the court (whether or not he or she is appointed by the court).

The objective of administration is to:

rescue a company as a going concern;
achieve a better price for the company’s assets or otherwise realise their value more favourably for the creditors as a whole than would be likely if the company were wound up (without first being in administration); or
in certain circumstances, realise the value of property in order to make a distribution to one or more preferential creditors.

2. How does a company enter administration?

A company enters administration when the appointment of an administrator takes effect. An administrator may be appointed by:

an administration order made by the court;
the holder of a floating charge; or
the company or its directors.
The administrator must perform his or her functions as quickly and efficiently as reasonably practicable.

3. What are the effects on a company of being in administration?

When a company enters administration:

any pending winding-up petitions will be dismissed or suspended;
there will be moratorium on insolvency and on other legal proceedings;
if an administrative receiver has been appointed, he or she must vacate office;
if a receiver of part of the company’s property has been appointed, he or she must vacate office(if the administrator requires this).

4. Who must be told that a company is in administration?

As soon as reasonably practicable, an administrator must send a notice of his or her appointment to the company and each of its creditors and publish notice of his or her appointment in the Gazette and in a newspaper in the area where the company has its principal place of business.

What is the Gazette?
The Gazette is the official newspaper of record which contains various statutory notices and advertisements. It is published daily. References to the Gazette are to the London Gazette in respect of companies registered in England and Wales.

Notices placed by the Registrar of Companies in England and Wales are included in the Company Law Official Notifications Supplement to the London Gazette which is published on microfiche. You may see copies at the Companies House search rooms in Cardiff and London. Some of the larger public libraries also have copies. Visit the Gazette for more information.

The administrator must send a notice of his or her appointment to the Registrar on Form 2.12B.

While a company is in administration, every business document issued by or on behalf of the company or the administrator must state the name of the administrator and that he or she is managing the affairs, business and property of the company.

5. What does the process of administration involve?

The administrator will request a statement of the company’s affairs from relevant people (e.g. an officer or employee of the company).

No later than 8 weeks after the company enters administration, the administrator must make a statement setting out proposals for achieving the purpose of the administration or explaining why they cannot be achieved. The proposals may include a voluntary arrangement or a compromise or arrangement with creditors or members.

The statement setting out the proposals must be sent to:

The Registrar of Companies.
every creditor of the company with an invitation to an initial creditors’ meeting, if one is to be held; and
every member of the company, unless the administrator publishes a notice to the effect that he will provide a copy free of charge to any member of the company who applies in writing for a copy.
The business of the initial creditors’ meeting will be to approve (with or without modifications) the statement of proposals. Following the initial meeting, the administrator may

hold further creditors’ meetings;
form a creditors committee; or
deal with matters in correspondence between the administrator and creditors.
The Administrator must notify any revisions to the proposals following the creditors’ meeting to members.

Decisions taken at creditors’ meetings must be reported to the Register of Companies on Form 2.23B and to the court.

6. When does administration end?

There are several ways in which administration can come to an end.

Administration can end automatically when the administrator’s term of office expires. The appointment of an administrator expires after 1 year. However, this may be extended with the consent of creditors or the court. Any extension must be notified to the Registrar on Form 2.31B.

An administrator appointed under a court order may apply to the court to end administration if he or she thinks that the purpose of the administration cannot be achieved or the company should not have entered administration, or a creditors’ meeting requires the application. The court will discharge the administration order and the administrator must notify the Registrar on Form 2.33B.

An administrator appointed by the holders of a floating charge or by the company or its directors may end administration when the purpose of administration has been sufficiently achieved. The administrator must file notice with the court and with the Registrar on Form 2.32B.

Administration may end on the application of a creditor to the court alleging an improper motive on the part of the person who appointed the administrator or applied to the court for an administration order. The administrator must send a copy of the order with Form 2.33B to the Registrar within 14 days of the order being made.

Administration may end when the company moves into creditors’ voluntary winding up. This can happen where the administrator thinks that each secured creditor is likely to be paid and a distribution will be made to unsecured creditors, if there are any. The administrator must notify the Registrar on Form 2.34B and send copies to the court and each creditor. The company will then be wound up as if a resolution for voluntary winding up had been passed on the day on which notice is registered with the Registrar.

Administration may end when the company moves into dissolution. This can happen if the administrator thinks that a company has no property with which to make a distribution to its creditors. The administrator must send notice to the Registrar on Form 2.35B and send copies to the court and each creditor.
3 months after the date the form is registered with the Registrar, the company will be dissolved unless, on application to the court, an order is made to extend or suspend the period or stop the dissolution. Notice of the order must be notified to the Registrar on Form 2.36B.

7. Which forms should be used?

The Insolvency (Amendment) Rules 2003 came into force on 15 September 2003, and introduced new statutory forms for filing with the Registrar, some of which are listed below:

Form title Number
Notice of administrator’s appointment 2.12B
Notice of statement of affairs 2.16B
Notice of extension of time period 2.18B
Statement of administrators revised proposals 2.22B
Notice of result of meeting of creditors 2.23B
Administrators progress report 2.24B
Notice of automatic end of administration 2.30B
Notice of extension of period of administration 2.31B
Notice of end of administration 2.32B
Notice of court order ending administration 2.33B
Notice of move from administration to creditors voluntary liquidation 2.34B
Notice of move from administration to dissolution 2.35B
Notice to registrar of companies in respect of date of dissolution 2.36B
Notice of intention to resign as administrator 2.37B
Notice of resignation by administrator 2.38B
Notice of Vacation of office by administrator 2.39B
Notice of appointment of replacement/additional administrator 2.40B
Please note: These forms are not available from Companies House. They can be obtained from company law stationers or by visiting the Insolvency Service website.