Administration Order

(Section 10) – Solvent Business

Administration meaning: (Management; organisation; supervision)
Order meaning: (Command; direction; law; injunction; prescription)
 

Purposes for use: Section 8 of the Insolvency Act 1986

An Insolvency Practitioner – (Administrator) is appointed by the ‘Court’ following application by the company and or it’s creditors’, to protect the company from other creditors’ / stakeholders’ from commencing or continuing legal action against the company to further weaken its position.

Used if there are strong and reasonable prospects of return to profitability and the ultimate survival of the whole or part of the company. The objective is to ring fence the company from it’s creditors whilst allowing the company to promote a proposal to turnaround the business to re-pay its debts.

This scheme can be used to provide a short term protection for the company prior to promoting a CVA. More advantageous realisation of assets may be achieved than in a Winding-Up. Section 10 of the Insolvency Act 1986 provides the greatest powers to the Administrator within the Insolvency Act to protect the company whilst proposals for rescue are being formulated.
 

Purposes for achievement of an administration order:

1. The survival of the company and the whole or any part of it’s undertaking, as a going concern; or
2. The approval of a company voluntary arrangement; or
3. The sanctioning under section 425 of the Companies Act 1985 of a compromise or arrangement between the company and any such persons as are mentioned in that section; or
4. A more advantageous realisation of the company’s assets than would be effected on a winding up such order shall specify the purposes(s) for which it is made.

Key Issues:

• Protection of the company and it’s stakeholders for a company or utilised for partnerships.
• Locating root cause of the company’s difficulties.
• To establish if a future exists.
• Re-investment/re-financing/re-structuring.
• Responsibility of Directors/Shareholders.