LPC Law Notes > Business Law and Practice Notes
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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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