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  Frequently Asked Questions about the Enterprise Act: Company

> General < > Company < > Individual < > Crown Preference < > Financial Regime <

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  1. When does “new” administration start?
  2. Has administration changed?
  3. How has entering administration been made easier?
  4. Has the purpose of administration changed?
  5. What if the business cannot reasonably be saved?
  6. Does this mean he can sell off the business(es) on appointment?
  7. Who decides what is practicable?
  8. How is administration different from administrative receivership?
  9. How can creditors ensure this?
  10. Why have you introduced an overall time limit for administration?
  11. Why 12 months?
  12. Will it always be 12 months?
  13. What happens once the administrator has completed the administration?
  14. Can the administrator make distributions to creditors?
  15. Is administrative receivership going to be abolished completely?
  16. Will existing floating charge holders be able to appoint administrative receivers?

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1. When does "new" administration start?

The new administration procedure will commenced on 15th September 2003.

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2. Has administration changed?

Many of the ideas of administration have been retained, its collective nature, the moratorium, the opportunity to achieve different outcomes, among others. However, the changes made are substantial.  For example, we have introduced:

  • without court order entry into the procedure;
  • a single purpose divided into 3 objectives;
  • the express power for the administrator to distribute;
  • new exit routes from administration into dissolution and voluntary liquidation; and 
  • a faster and fairer procedure.

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3. How has entering administration been made easier?

Floating charge-holders, companies and directors of those companies will be able to appoint an administrator simply by filing a Notice of Appointment at court, without a court application and hearing. In specified circumstances they will have to give notice before filing such a Notice of Appointment.

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4. Has the purpose of administration changed?

The Act replaces the existing 4 statutory purposes of administration with a single, clearly defined purpose. There will be a hierarchy of objectives, the primary one being to rescue the company as a going concern, i.e. with as much as possible of its business, where it would provide the best result for the company's creditors as a whole.

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5. What if the business cannot reasonably be saved?

The administrator can perform his functions with the objective of achieving a better return for creditors than would be achieved in a winding-up.  For example, a better return may result from trading on for a period whilst seeking to sell off the business(es) and/or assets.

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6. Does this mean he can sell off the business(es) on appointment?

Yes, if he thinks it will provide the best result for creditors.  However, he has a duty to the creditors, and will be required to account to them for his actions.  For example, if he were to sell off all of the business he would have to explain to the creditors why he had not acted with the objective of rescuing the company, this may well be difficult to explain except in clear cut cases. The reasons may depend upon what is sold: the objective of rescuing the company may be furthered by selling off part of the business of the company.  For example, selling a loss-making part, the sale of which may enable the remaining parts of the company to prosper.

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7. Who decides what is practicable?

The administrator decides.  However, he is accountable to all the company’s creditors, who must vote as to whether to accept his proposals.  Also, the administrator may be challenged if he unfairly damages the interests of a creditor or member of the company.

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8. How is administration different from administrative receivership?

An administrator will have a duty to all the company’s creditors, not just the floating charge holder(s), irrespective of who appointed him.

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9. How can creditors ensure this?

Creditors can challenge the administrator’s actions by applying to court, claiming the administrator has caused unfair harm to their interests.

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10. Why have you introduced an overall time limit for administration?

To make administration more accessible and attractive, particularly to smaller firms and to give greater certainty to creditors and those dealing with companies under administration.

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11. Why 12 months?

This choice resulted from consultation with a wide range of interested parties.

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12. Will it always be 12 months?

No, simple cases could be completed much sooner. We have imposed a new duty on the administrator to perform his functions as quickly and efficiently as is reasonably practicable. Courts and creditors will be able to extend the period for more complex cases and time-scales could be amended by the Secretary of State in the future, in the light of experience.

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13. What happens once the administrator has completed the administration?

If the company with its business has been rescued, it could enter into a Company Voluntary Arrangement: or if there are funds to distribute to unsecured creditors, the company could move straight into Creditors' Voluntary Liquidation.  If there are no assets left to be realised and distributed, the company can be dissolved.

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14. Can the administrator make distributions to creditors?

Yes, but distributions to unsecured creditors can only be made with the permission of the court.

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15. Is administrative receivership going to be abolished completely?

It will still be necessary for certain large complex financial transactions in the capital markets, public-private partnerships, utility projects, project finance projects, financial markets and registered social landlords.

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16. Will existing floating charge holders be able to appoint administrative receivers?

Yes, holders of floating charges created before the Act came into force can choose to appoint an administrative receiver or an administrator.

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