The Compendium

Administration

The Enterprise Act 2002 introduced a number of important reforms, some of them (in Part 10) with respect to corporate insolvency in the United Kingdom. It aimed to promote the rescue and rehabilitation of financially-troubled companies and give greater protection to the interests of the general body of creditors.

It introduced the modern day process and procedure of Administrations (rewriting the Insolvency Act 1986 by including Schedule B1 which sets out the law for that process) and ended Administrative Receiverships for any fixed and floating or qualified floating chargeholders with charges registered after 15 September 2003.

All of the law you will need to access and know about Administrations is contained within Schedule B1 of the Insolvency Act 1986.

An important example is paragraph 3 of that Schedule. It sets out the objectives of an Administration. They are the:

(a) rescuing the company as a going concern; or

(b) achieving of a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in Administration); or

(c) realising of property in order to make a distribution to one or more secured or preferential creditors.

Administration is an insolvency process by which a company is placed under the control of an Insolvency Practitioner, to enable that person to achieve one or more of the above objectives. Note: the company must be insolvent when it enters into an Administration, unless the process is commenced by a Qualifying Floating Chargeholder.

To assist in implementing the three statutory objectives, a moratorium is provided by which creditors and others are prohibited from taking or pursuing legal proceedings against the company while it is in Administration.

There is an ‘in court’ and ‘out of court’ process for commencing Administration proceedings. An application for a court Order can be made by one or more creditors of the company, the company itself, its directors, a Liquidator, or a