The administrator manages the company’s affairs, business, and property as its agent and is generally empowered to take any action that is required or advantageous for that purpose.
The company and/or its directors and the administrator both have the same general authority. Asset disposal is covered by this general power. Before selling the company’s property, the administrator is not required to get the creditors’ approval.
The Insolvency Act of 1986 (IA 1986) and the Insolvency (England and Wales) Rules 2016 (IR 2016), SI 2016/1024, outline the role, responsibilities, and powers of an administrator.
Although the old administration framework was drastically modified by the Enterprise Act of 2002 (EnA 2002), the administrator’s authority and obligations were not fully abolished.
They continue to be applicable to all administrations that took place before to September 2003 as well as administrations of specific businesses listed under EnA 2002, s. 249. Examples include building societies and rail companies. The position following April 6, 2017, is the primary emphasis of this practise note.
The administrator’s role and function
The administrator plays a vital role in managing the insolvency process of a company administration. Their primary function is to take control of the company’s affairs and assets, and to manage its operations with the aim of maximizing the returns to its creditors. The administrator is typically appointed by a court or by the company’s directors and has the power to make decisions on behalf of the company, including the power to sell assets, negotiate with creditors, and restructure the company’s operations.
Additionally, the administrator is responsible for investigating the company’s affairs and financial position, and for preparing reports for creditors and other stakeholders. They must also work with other professionals, such as lawyers and accountants, to manage the insolvency process effectively. The administrator’s goal is to facilitate a fair and orderly distribution of the company’s assets to its creditors, while minimizing the impact on other stakeholders such as employees and customers.
The administrator’s duties
The main responsibility of an Administrator is to operate in the interests of all creditors. Therefore, if a creditor’s stance does not align with that of the creditors as a whole, the Administrator is not required to act in that creditor’s best interest.
The following are the general responsibilities of an administrator:
- to act honestly and honourably
- to manage the company’s affairs in accordance with the Administrator’s Proposals document; to act quickly and efficiently
- to act with the care and skill of an ordinary skilled and careful insolvency practitioner
- to take reasonable care to obtain the best price attainable for the company assets
- to act with purpose and adhere to relevant considerations when performing functions
- and to act with diligence and diligence.
The administrator’s powers
The administrator has the following powers:
(1) The authority to seize, gather, and obtain the Company’s property and to take any actions he deems necessary for that purpose.
(2) The right to sell or otherwise dispose of Company property by a public auction or a private contract, as well as the right to sell, hire out, or otherwise deal with Company property through a public gathering or a private agreement.
(3) The ability to lend or borrow money and give the Company’s assets as security.
(4) The authority to designate a lawyer, accountant, solicitor, or other professionally trained person to help him in carrying out his duties in each case who is licenced in accordance with the Commercial Licencing Regulations 2015 as such.
(5) The ability to act in the Company’s name and on its behalf in any legal action or defence.
(6) The authority to refer any issue involving the Company to arbitration.
(7) The ability to implement and maintain insurance policies pertaining to the Company’s operations and assets.
(8) The authority to employ the Company’s seal.
(9) The authority to carry out all actions and sign any deed, receipt, or other instrument in the Company’s name and on its behalf.
(10) The ability to draught, accept, make, and endorse any promissory note in the Company’s name and on its behalf.
(11) The authority to appoint any agent to carry out any business that he is unable to carry out personally or that an agent can carry out more easily, as well as the authority to hire and fire staff.
(12) The authority to carry out any actions (including the execution of work) that may be required for the realisation of the Company’s property.
(13) The ability to make any payment that is incidental or required for the fulfilment of his duties.
(14) The ability to do the Company’s operations.
(15) The authority to create subsidiaries for the Company.
(16) The authority to transfer all or a portion of the Company’s assets and business to subsidiaries of the Company.
(17) The authority to take a lease or other real property interest that is necessary or practical for the Company’s operations as well as the authority to grant or accept the surrender of a lease or other real property interest owned by the Company.
(18) The authority to negotiate any agreement or deal on the Company’s behalf.
(19) The ability to call up any Company capital that has not yet been summoned.
(20) The ability to rank in the bankruptcy, insolvency, sequestration, or liquidation of any person who owes money to the company, to earn dividends from such a person’s assets, and to consent to trust deeds on their behalf.
(21) The ability to file or oppose a petition for the company’s dissolution.
(22) The ability to alter the circumstances around the registered office of the company.
(23) The ability to perform any additional tasks necessary for the execution of the aforementioned powers.
Statements of Insolvency Practice
Statements of Insolvency Practice (SIPs) are guidelines issued by the UK’s main insolvency regulatory body, the Insolvency Practitioners Association (IPA), to regulate the conduct and behavior of insolvency practitioners in England and Wales.
The SIPs are designed to ensure that insolvency practitioners maintain high standards of professional conduct and are consistent in their approach to insolvency proceedings. The following are the current SIPs as of my knowledge cut-off date, 2021:
- SIP 1 – Communication and transparency: requires clear and timely communication with creditors and other stakeholders throughout the insolvency process.
- SIP 2 – Investigations by officeholders: outlines the steps that insolvency practitioners should take when investigating the affairs of an insolvent company.
- SIP 3.1 – Company Voluntary Arrangements: provides guidance on the conduct of insolvency practitioners when acting as supervisors of Company Voluntary Arrangements (CVAs).
- SIP 3.2 – Individual Voluntary Arrangements: provides guidance on the conduct of insolvency practitioners when acting as supervisors of Individual Voluntary Arrangements (IVAs).
- SIP 4 – Disqualification of directors: sets out the procedures and requirements for insolvency practitioners to report to the Secretary of State any unfit conduct by directors.
- SIP 5 – Avoidance of conflict of interest: requires insolvency practitioners to avoid conflicts of interest and to disclose any potential conflicts.
- SIP 6 – Realisation of assets and payment of dividends: sets out the principles and procedures for the sale of assets and distribution of funds to creditors.
- SIP 7 – Presentation of financial information in insolvency proceedings: provides guidance on the presentation of financial information in insolvency proceedings to ensure accuracy and transparency.
- SIP 8 – Fees and expenses of officeholders: requires insolvency practitioners to be transparent about their fees and expenses, and to seek creditor approval for their fees.
- SIP 9 – Payments to insolvency office holders and their associates: sets out the procedures and requirements for insolvency practitioners to disclose and obtain approval for any payments made to themselves or their associates.
- SIP 10 – Handling of funds in formal insolvencies: provides guidance on the handling of funds in formal insolvency proceedings to ensure accuracy and transparency.
Note: It’s important to keep in mind that the SIPs are updated and revised periodically, so this list may not be exhaustive or up to date.
The administrator’s discharge
The discharge of the administrator is an important step in the insolvency process, as it signifies that the administrator has fulfilled their obligations to the company and its creditors. The Insolvency Act sets out specific criteria that must be met before an administrator can be discharged, including the completion of all necessary reports, the distribution of funds to creditors, and the resolution of any outstanding issues. Once the administrator has met these requirements, they may be discharged by the court or by the company’s creditors.
The discharge of the administrator is governed by the main act in the UK: the Insolvency Act 1986 and the Insolvency (England and Wales) Rules 2016. The act set out the procedures and requirements for the discharge of the administrator, including the filing of final reports and the distribution of funds to creditors.
The acts also specify the circumstances under which an administrator may be prevented from being discharged, such as if there is evidence of misconduct or mismanagement.
Overall, the discharge of the administrator is a critical part of the insolvency process, and it is important that the administrator meets all requirements to ensure a fair and orderly distribution of the company’s assets to its creditors.
Frequently asked questions
The role of an administrator in the UK is to act fairly and honourably. To manage the company's affairs as set out in the Administrator's Proposals document. To act quickly and efficiently. to act with reasonable care and skill of an ordinary skilled and careful insolvency practitioner.
The power of a company administrator are very wide as an administrator may do anything necessary or expedient for the management of the affairs, business and property of the company. While there are a wide range of specific powers set out under IA 1986, these are not exhaustive in light of the administrator's overall duty. What is the role of an administrator in the UK?
What is the power of a company administrator?
Conclusion
In conclusion, the role and powers of the administrator are critical in the insolvency process in England and Wales. The administrator assumes the role of the company’s agent, with general powers to manage its affairs, business, and property. The discharge of the administrator is an essential step in the insolvency process, ensuring the fair distribution of the company’s assets to its creditors.
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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.