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A company can be put into administration when it is unable to
pay its debts as they fall due and a licensed insolvency
practitioner is willing to express his opinion to the Court that
doing so will result in one of the following statutory purposes of
the administration regime being achieved:
the rescue of the company as a going concern,
a better outcome for the company's creditors than an
insolvent liquidation, or
the company's property being collected in with a view to
making payment to one or more secured or preferential
creditors.
Either the company or its directors may appoint an
administrator, although if there are any floating charge holders
they must be given notice of the intention to appoint an
administrator, which will allow them to make an appointment
themselves in the intervening notice period. It is also open to the
holder of a qualifying floating charge to make an appointment of
its own accord, without having received any other notice of
intention to appoint. Unsecured creditors of the company also have
a right to apply to the Court for an Order appointing an
administrator.
When a company goes into administration it can continue to
trade, as long as the administrator remains of the view that one of
the objectives mentioned above can be achieved. The company acts
via its administrator and he/she has the power to do anything in
the name of the company that the company could do
pre-administration. A moratorium is imposed on court or other legal
proceedings against the company in administration, which can only
be circumvented by obtaining the consent of the administrator or
the court.
An administration can last up to one year without the need for
the administrator to take any further action and at the expiry of a
year can either be extended for up to 6 months with the consent of
all of the company's secured creditors and at least 50% of the
its unsecured creditors or indefinitely with the Court's
permission (although the court will only normally grant extensions
up to one year). Once an extension has been approved by creditors
any further extension can only be obtained by applying to
Court.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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