A notice to appoint an administrator is a document that is filed in court telling the courts that the company intends to go into administration.
This attempt to save the business from insolvency procedures, such as liquidation, can be filed by the directors or a floating charge holder.
The process temporarily suspends any creditor action and, therefore, can present companies with some interim relief. We are outlining the procedure and the subsequent advantages and disadvantages for filing the intent
What is a notice of intent?
A notice of intent declares your intention to appoint an administrator in order to rescue your business, repay creditors and save it from liquidation. The notice of intent is a document filed at court, stating a company’s intention to appoint administrators in an attempt to save the business from liquidation. The document can be filed by the company, its directors, or a floating charge holder, which is usually the bank.
The Notice of Intention to Appoint helps businesses by temporarily halting existing or pending creditor action – it sets up a moratorium that protects them, and provides a breathing space in which to take positive action.
As soon as the notice is filed at court, it creates an immediate moratorium around the company. The moratorium lasts for ten business days. During the moratorium, the company’s creditors cannot take legal action or continue with existing legal proceedings against the company without the court’s permission.
The notice of intention is also used to let parties such as creditors, and floating charge holders of what is occurring.
Are multiple notices of intent allowed?
Sometimes it is possible to obtain agreement from the court for a further moratorium period of 10 days – for example, if an appropriate solution to the company’s troubles has been identified and a deal is approaching completion. It is unlikely that the courts would agree to numerous application extensions in this vein, however, and attempting tactical applications in order to secure more time to find a solution could be seen as an abuse of court process.
What form is used to file a notice of intent?
A form 2.8B is used to file for an appointment of administration. This is the form that is used to notify the courts that the company intends to appoint an administrator. You can see a downloadable version of the Form 2.8B here. The notice must be filled out and filed correctly. The form includes key information that must be completed, such as the name of the proposed administrator.
How to go about filing?
A maximum of 5 business days before filing the notice with the court, certain parties must be informed of the intended action. Such parties include floating charge holders, supervisors of a voluntary arrangement and any others who are entitled to appoint an administrator. A rare scenario but, if any of these parties object to the proposed appointment they have the chance to appoint their own.
What happens once this notice has been sent?
A moratorium is created over the company for an initial period of 10 days, preventing any creditor from starting legal action or continuing any existing legal action against the company, without permission from the court.
An extension of 10 days can be applied for if it looks like a deal is imminent – but this extension must be in the interest of creditors and must be justified. The notice informs parties, namely, creditors and floating charge holders of the current events.
Who can file the notice of intention to appoint an administrator?
The company, its directors and the holder of a qualifying floating charge over the company’s assets can file the notice of intent to appoint an administrator. You cannot file the NOI in the absence of a floating charge holder on which to serve the notice. If you do see this as your only option, and have received debt advice prior, you have five business days minimum to provide the written notice to the QFCH. Typically, the floating charge holders are the bank, and this window is to provide them an opportunity to appoint their own administrator.
Reasons for the notice
The most important thing you can do when you begin to notice any financial issues is to seek immediate debt advice. The earlier you speak to a professional for guidance, the more options there are available for your company. If you leave it as late as possible, your creditors could submit a winding up petition, which, generally, results in complete closure of the company.
Administration can be the best solution for eligible companies experiencing severe cash flow issues, but that have a viable business underlying their problems. It’s a formal insolvency procedure that’s commonly used to restructure a company, and can lead on to company voluntary arrangement procedures or a process known as pre pack administration.
Pre pack administration involves the quick sale of a company’s assets, often to the existing directors who use their own funds to purchase the assets. The buyers then set up a ‘newco’ and continue trading without the debt.
The company administration procedure must be sanctioned by a licensed insolvency practitioner as the most suitable after any other alternatives. Likewise, the issue of creditor dividends must be taken into account. Pre-pack administration, for instance, can result in much higher returns for creditors and is in their interest.
Like more advice?
If you are considering putting your company into administration and want to talk to someone for a no obligation chat please feel free to call us on our insolvency enquiry line, or drop us an online enquiry.
With over three decades of experience in the business and turnaround sector, Steve Jones is one of the founders of Business Insolvency Helpline. With specialist knowledge of Insolvency, Liquidations, Administration, Pre-packs, CVA, MVL, Restructuring Advice and Company investment.