What is a special administration?

There are several key differences between a company administration and a special administration:

• Purpose: A standard administration is a general insolvency procedure that is used to help businesses that are facing financial difficulties to restructure and return to profitability. A special administration, on the other hand, is a specific insolvency procedure that is used in cases where a business provides a statutory or public service, or holds client money and is regulated by the Financial Conduct Authority (FCA).
• Appointment: An administrator is appointed by the company’s directors or creditors, while a special administrator is appointed by the FCA.
• Powers: Both standard and special administrators have wide-ranging powers, including the ability to sell assets, negotiate with creditors, and make changes to the company’s management structure.
• Duration: The duration of a standard administration is typically around one year, although it can be extended if necessary. A special administration, on the other hand, can last up to eight years, depending on the circumstances.
• Outcomes: The ultimate goal of both a standard and a special administration is to either restore the company to financial stability or to wind it down in an orderly manner, depending on the circumstances. The specific outcomes of each process can differ, depending on the nature and complexity of the business, the extent of its financial difficulties, and the actions taken by the administrator.

Special Administration Regimes (SARs)

Special Administration Regimes (SARs) are legal frameworks that govern the special administration process in specific industries or sectors. These regimes are designed to ensure that the special administration process is conducted in a consistent and transparent manner, and to protect the interests of the company’s customers and clients. SARs are typically established by regulatory bodies or government agencies, and they set out the rules and procedures that apply to special administrations in a particular industry or sector.

For example, the Financial Conduct Authority (FCA) has established a SAR for businesses that are regulated by the FCA and that provide a statutory or public service, or hold client money. The SAR sets out the powers and responsibilities of the special administrator, as well as the rights and obligations of the company’s management, creditors, and other stakeholders. SARs are an important part of the special administration process, as they provide a clear and transparent framework for the resolution of financial difficulties in specific industries or sectors.

Special administrations in the energy industry

Special administrations in the energy industry refer to the appointment of a third party to oversee the financial and operational restructuring of an energy company that is experiencing financial difficulties. This can include companies in the oil and gas, renewable energy, and utility sectors.

The goal of a special administration is to ensure the continued operation of the company and protect the interests of its stakeholders, including employees, shareholders, and creditors. The appointment is typically made by a court or regulatory body, and the administrator has the authority to make decisions and implement changes in order to stabilise the company and improve its financial performance.

The duration of a administration can vary, but it is typically a temporary measure until the company is able to return to financial stability.

Read more: How do Pre Pack Administration work

What happens to a company in special administration?

The special administrator is also responsible for developing a plan to return the company to financial stability and present it to the court or regulatory body that appointed them. While the company is in administration measures, it may continue to operate as normal, or it may be required to make changes to its operations in order to improve its financial performance.

In some cases, the government may provide financial support to a company in special administration in the form of loans, bonds, or guarantees. The goal of government support is to resolve the situation as quickly as possible and return the company to financial stability. Special administration is not intended to be a long-term solution, and the company is expected to be able to return to financial viability on its own once the restructuring process is complete.

However, the extent and duration of government support will depend on the specific circumstances of the company and the nature of the financial difficulties it is facing. In some cases, the government may require the company to implement certain conditions or requirements in exchange for financial support.

If the special administrator determines that the company cannot be financially viable, they may recommend that the company be liquidated. In this case, the company’s assets would be sold off and the proceeds would be distributed to its creditors.