Role of an Administrator
Once a Company enters into Administration, the Insolvency Practitioner you have been dealing with will formally be appointed as Administrator of the Company. As a result there are several statutory duties placed on the Administrator that must be completed in every Administration.
Business and Assets
The Administrator’s foremost duty is to realise the assets of the Company for the benefit of the Administration estate.
Assets of a Company can range from office equipment to stock, property or even an entire trading business and therefore an Administrator must make an assessment of the way to sell the assets to ensure it maximises the realisation. Immediately prior to going into Administration, the Company is usually trading and therefore the Administrator will review the value of the business as a whole and may look to continue the operations for a short period (depending on cash availability to meet costs) to be able to sell the business as a Going Concern, which would typically maximise financial beneficial to the Administration.
It will therefore be for the Administrator and any assisting Agent to determine how best to realise the value of the Company’s assets for the Administration estate. Another potential avenue for realisation could be by way of a ‘pre-pack’ sale or a sale to a connected party. A Pre-pack sale is whereby the business is marketed for sale prior to an Administrator’s appointment and the sale is executed immediately after the Company entering into Administration. If the ‘pre-pack’ is to a connected party then it is advisable that they approach the ‘pre-pack pool’ for a review of sale and to get their approval to show that the deal has been independently reviewed and has been judged to be fair in the circumstances. The important factors for all parties to consider with sales to connected parties is to ensure that the business has been marketed for a good time to ensure maximum interest can be generated and that the sale consideration is at least market value and, if going to be paid over time, that sufficient security has been given.
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Report on Director’s conduct
One of the Statutory duties placed on an Administrator is to produce a report on the conduct of the Directors of the Company (including anyone who has been a Director of the Company in the 3 years preceding Administration).
This is not a criticism of individual Directors and is done on every Administration. The purpose of the report is to ensure the Insolvency Service can assess whether the Directors of the company were materially responsible for the Company’s demise and take action against Directors in the cases where they have.
This report takes the form of an online questionnaire that the Administrator completes for the Insolvency Service . This will be completed using information that has come to light during the investigation of the Company’s affairs (explained below) and any information that has been presented to the Administrator by third parties (such as creditors).
Another of the statutory duties of the Administrator is to conduct an investigation into the financial affairs of the Company. The purpose of the investigation is to understand whether any “antecedent transactions” have been committed and take the necessary action against the parties if they have.
The most common antecedent transactions are Preference Payments and Transactions at an undervalue.
A preference payment is where a Company pays a creditor, in the 2 years prior to Administration to connected parties or 6 months to unconnected parties, with the desire to put them in a better position that the other creditors whilst the Company is insolvent.
A transaction at an undervalue is where a transaction is entered into, in the 2 years prior to Administration to connected parties or 6 months to unconnected parties, that is for significantly less than the consideration supplied by the Company.
Should such potential payments be located then the Administrator will contact the Director with a list of the queried payments to try and understand if there is an alternative explanation. If the transactions are confirmed to be as suspected, then the Liquidator will seek repayment of the relevant amounts by the Director or beneficiaries to the administration estate.
If a Company has employees with outstanding amounts due to them for Redundancy, Notice Pay, Holiday Pay or Arrears of wages then the employee will be able to claim those amounts from the Redundancy Payments Service (‘RPS’) once the Company is in Administration.
Once the Company is in Administration, the Administrator will submit the relevant forms to the RPS to advise of the amounts due to the employees as outlined by the Company’s records. This will enable the RPS to corroborate the claims made by the employees and ensure that each employee receives the correct amount.
Dealing with Creditors
Once a company enters into liquidation all correspondence creditors have must be redirected to the liquidator to deal with. A creditor is no longer allowed to contact a Director once the Company is in liquidation.
A liquidator must advise creditors of their appointment within 28 days and must provide annual progress reports within two months of the anniversary of their appointment to keep creditors up to date. Creditors are able to request more frequent updates, but a liquidator must decide whether doing so unfairly affects the liquidation estate by adding unnecessary time costs for the sake of an update to one creditor. This will of course need to be decided on a case by case basis.
When you get in touch with us, you will speak directly to a licensed Insolvency Practitioner from the outset. We will take the time to understand your Company’s financial position, what your future intentions are for the business and ultimately what outcome you are hoping for.
If you feel your Company needs the immediate protection provided by Administration we are able to help so please call us to discuss your options in more detail.
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