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LPC Law Notes Business Law and Practice Notes

Administration And Cv As Notes

Updated Administration And Cv As Notes

Business Law and Practice Notes

Business Law and Practice

Approximately 649 pages

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ADMINISTRATION

Negotiation/ Informal Agreement with Creditors

Purpose To provide some short-term relief from immediate debts. Administration or a CVA will rarely be a company’s first choice.
Procedure Approach lenders and/or creditors and informally renegotiate the terms of their arrangement e.g. time to pay, amount.
Advantages Can negotiate terms that sets payment at a later date when there are more funds available
Disadvantages Difficult to achieve with multiple creditors and may just be a means of prolonging the inevitable
Feasibility Yes when there is only one major creditor but may not accept

Administration

Purpose

A temporary measure to (Paragraph 3 Sch B1 IA 1986):

  • 3(1)(a) rescue the company as a going concern

  • 3(1)(b) achieve better result for the creditors as a whole than if company were wound up

  • 3(1)(c) realise property to make a distribution to one or more secured/preferential creditors

May end in:

  • Rescue as a going concern

  • Sale as a going concern & liquidation

  • Piecemeal sale of assets & liquidation

Procedure
  • 1(2)(b) Commences when the appointment of the administrator takes effect

  • 43 A moratorium starts which prevents actions which hinder the administrators task – (although an interim moratorium can start before an administrator’s appointment (44)) this prevents: s.42(2) voluntary liquidation, s.42(3) compulsory liquidation, and s.43(2) third parties enforcing contractual rights.

  • Sched A1 para 8 (pg.890) The moratorium ends on either the day of the meeting to consider CVA (2) or 28 days (3) whichever is earlier

  • The administrator is an external manager, who is a qualified insolvency practitioner, who takes over the running of the company and puts together proposals to achieve the purposes of administration in 3(1)

  • An administrator can be appointed by the court (less common), a qualified floating charge holder (QFCH) 14, the company, or the directors

QFCH

Para 14(1) The floating charge must be a qualifying floating charge – 2 stage test:

  • 14(3) Relates to the whole, or substantially the whole, of the company’s undertaking

  • 14(2) States that para 14 applies or purports to give the debenture holder the power to appoint an administrator

Para 15(1)(a) Give at least 2 business days’ notice to any prior QFCH or written consent obtained prior to the appointment of administrator

Para 18 Notice of appointment must include statutory declaration and be filed with the court stating that:

  • That they have a qualifying floating charge

  • It was enforceable

  • Appointment is in accordance with the schedule

Para 19 Appointment takes effect when the documents have been filed

No appointment may be made my a QFCH if:

  • 17 – administrative receiver is in place

  • 7 – company is in administration

  • 8 – company is in liquidation

  • 17 – Provisional liquidator has been appointed

Company / Directors

Appointment by Company: Ordinary resolution

Appointment by Directors: Majority resolution (show of hands)

Para 26 (1) – Notice to appoint an administrator must be given to any holder of qualifying floating charges and any person entitled to appoint an administrator or administrative receiver at least 5 business days before the appointment

(3) the notice must identify the proposed administrator

Para 27 (1)– The notice and any documents accompanying it must be filed with the court

(2) the notice must include a statutory declaration that must state that:

  1. the company is or is likely to be unable to pay its debts

  2. not in liquidation

  3. there are no restrictions to appointment

Para 29 – appointment of an administrator can be made once the 5 business days have passed. A notice of appointment, statutory declaration and statement from the administrator are then filed with the court. Appointment takes effect and the moratorium comes into effect at this point

No appointment may be made if:

  • 7 – company is in administration

  • 8 – company is in liquidation

  • 23(2) – company has been in administration or has entered into a CVA as a result of administration within the preceding 12 months

Para 46 – on appointment, the administrator sends a notice of appointment

  • (2) to the company immediately

  • (3) to the creditors within 28 days of appointment

  • (4) to the registrar of companies within 7 days

Para 47 – after appointment the administrator of a company requests, the administrator submit a notice requesting a statement of affairs from the company

Para 48 – the company must submit a statement of affairs within 11 days of receiving the notice from the administrator

Para 49 – the administrator makes a statement setting out the proposals for achieving the purpose of the administration within 8 weeks of the appointment

Para 51 – the administrator must hold a creditors meeting within 10 weeks beginning with the day the company enters administration, the creditors will consider the proposals

Once the proposals have been approved, the administrator has 12 months from appointment to put the proposals into effect and to achieve the purposes of the administration – this period can be extended by the court or by the agreement of the creditors

Powers of Administrator
  • Found in Schedule 1 page 937

  • Run the Company in place of the directors – carry on the business, sell assets, borrow money

  • Has same powers of a liquidator regarding: undervalue transactions, preferences, floating charges and transactions defrauding creditors

Advantages Can negotiate terms that...

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