Placing a company into Administration can be a complicated process and dependent on your companies individual circumstances. Often, this is led by the directors of the company itself, or by its shareholders.
It is possible in many circumstances for the directors or shareholders to pass a resolution to place the company into administration – provided that it is insolvent and various other requirements are met.
This is most often done by way of engaging an insolvency practitioner to act as an administrator, a solicitor will also be appointed to draft the relevant appointment documents and ensure that they are filed at Court following the correct procedures.
Who can put a company into administration?
Depending on the situation that the business is in, and how severe the financial issues may be, there are a few people who can put a company into administration. Typically, it is the directors who initiate the administration proceedings, though it can sometimes be company shareholders that start this process.
In more extreme cases, administration proceedings can be started by a bank through the courts. This means that the company directors have no choice in the matter and an Insolvency Practitioner will be appointed for them.
How can a company be placed into administration
There are three ways in which a company can enter administration:
- By order of the court – A court may make an order for the administration of a company on the application of, among others, one or more creditors, directors or shareholders of the company.
- Directors or shareholders – can request the company enters administration if the company fails the insolvency test.
- Charge holder – a holder of a “qualifying floating charge” can file certain forms with the court upon which the administration commences. No court hearing is necessary.
A party who has a floating charge over substantially all of the assets of the company (and meets certain other criteria) is a holder of a “qualifying floating charge”. Any holder of such charge must be notified of the intention to appoint an administrator and can choose to appoint an administrator of its own choice instead of the person nominated.
In order for a Company to be placed into Administration, it must be established that the Administration will achieve one of the following purposes:
- Rescuing the Company as a going concern,
- Achieving a better result for the company’s creditors as a whole than would be likely if the Company were wound up, or
- Realising property in order to make a distribution to one or more secured or preferential creditors.
Assuming at least on of these objectives can be met, and in order for the Directors or Shareholders to appoint an Administrator, the following requirements must be met:
- The Company must not have been placed into Administration within the last 12 months, 2. The Company has not been subject to a moratorium for a failed Company Voluntary Arrangement in the last 12 months,
- A winding up petition has not been presented,
- A winding up order has not been made,
- A resolution for Voluntary winding up has not been passed, and
- An Administrative Receiver is not in office.
If these conditions have been met the Directors or Shareholders of the Company would be able to appoint an Administrator directly and the first step to place the Company into Administration is to have a meeting of directors or shareholders to resolve that an Administrator be appointed. In this regard Purnells can prepare all of the necessary paperwork for you.
Once that paperwork is signed and sworn it is simply a matter of filing that paperwork into Court and the Company will immediately be placed into Administration. There is not need for any court hearing the documents are stamped by the Clerk and given a Court Reference.
What happens if the company has a fixed charge?
If there are Floating Charge Creditors however you first need to file a Notice of the Intention to Appoint an Administrator and provide five business days notice to the Floating Charge Holders, which is usually the Bank. After the five business days have elapsed the Notice of the Appointment of an Administrator can then be filed in court and once that form has been stamped the Company is in Administration.
Placing a company into Administration can be complicated because the procedure to follow is highly dependent on the circumstances of the Company however the above guide is a brief overview of the matter. No matter what the circumstances of your company will be more than happy to explain how to place your company into Administration and will prepare all of the necessary documentation for you to ensure that the process is as quick and as straightforward as possible.