Administration Creditors

Negotiation/ Informal
Agreement with

ADMINISTRATION
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

Purpose
Procedure

A temporary measure to (Paragraph 3 Sch B1 IA 1986):
May end in:
 3(1)(a) rescue the company as a going concern
 Rescue as a going concern
 3(1)(b) achieve better result for the creditors as a whole than if company were wound up
 Sale as a going concern & liquidation
 3(1)(c) realise property to make a distribution to one or more secured/preferential creditors
 Piecemeal sale of assets & liquidation
 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

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