For companies in a difficult financial position, directors have a few options available to help remedy the situation.
If the company has a viable business model, directors could choose to negotiate with outstanding creditors to reach a new agreement with a Company Voluntary Arrangement (CVA).
If the company doesn’t have a viable future, directors could instead choose to place their company into Creditors’ Voluntary Liquidation (CVL). This procedure aims to wind up the company while ensuring directors uphold their obligations to creditors.
However, if a company occupies a middle ground between these two positions, directors may choose to place it into administration. Administration is usually reserved for companies with a viable future, with the main aim of restructuring the company and making it profitable again. If this is not possible, administration affords the option to prepare the company for sale, or place it into liquidation. If you believe administration is the right option for your company, you must first issue a notice of intention to appoint an administrator before taking action.
In this article, we will discuss notices of intention to appoint an administrator, what they do, and the wider procedure of company administration.
What is company administration
Company administration is an insolvency procedure aimed at returning a company to profitability. If this is not feasible, it will instead aim to retain as much value within the company and prepare it for sale, or place it into liquidation if necessary. These actions will be taken by the administrator, a role occupied by an insolvency practitioner appointed to the position. They will be responsible for helping to get the company back on track, or winding it up if the situation cannot be salvaged.
Typically, company directors will be able to appoint an administrator of their choosing. This is because administration is a voluntary procedure, one that a company’s directors generally initiate with a clear goal in mind. This being the case, these directors will prioritise insolvency practitioners who can achieve their desired outcomes for their companies. However, this is not always the case. Occasionally, shareholders will initiate a company administration if enough support can be gathered. This is typically only done in cases of mismanagement, where a company’s directors have failed to properly steer the company and lost the faith of their shareholders.
In even rarer circumstances, a company can be placed into administration by its creditors, most usually a bank, if they do not believe the current directors can ensure they are repaid. This will occur through a court order, and completely removes any control directors might have had over the situation. An administrator will be appointed to the case by the courts, and will carry out the procedure in the best interests of creditors.
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How can I file a notice of intention to appoint an administrator?
Given the complexity of dealing with an insolvent company, you should always speak to an insolvency practitioner (like Clarke Bell) for advice before you make any firm decisions. The advice we give you is free, and it will enable you to take the best option for you and your company.
If administration is the best route for your company, you must first file a notice of intention to appoint an administrator. This must be done at least five days before taking action, and must be provided to qualifying floating charge holders (QFCH) in written form. Generally speaking, QFCH will refer to your bank, but can also include other parties in some cases. As the QFCH is eligible to appoint an administrator of their choosing, it is vital you keep them in the loop, and obtain their approval for things to go smoothly. If you do not notify these parties of your intention, or they object to the attempted administration, they may try to block the procedure or appoint an administrator of their own. As such, you should ensure that any part capable of obstruction or eligible to appoint an administrator is on board with your decision before you act.
What does a notice of intention to appoint an administrator do?
Once a notice of intention to appoint an administrator has been filed, a moratorium will immediately be established around the company for a period of ten days. This moratorium drastically reduces the risk of any legal action being taken against the company in question. Any parties looking to create or continue a legal case must first obtain the approval of the courts, which is an exceedingly rare event. In essence, you will not have to worry about legal action while in this moratorium.
If you need additional time, extending the moratorium for another ten days may be possible, though this is not a particularly common occurrence. For an extension to the moratorium, you will likely have to identify a viable solution to your company’s problems, or be in the final stages of a transaction. If you cannot identify a solution within the ten day moratorium, you are unlikely to be granted an extension. Moreover, if you attempt to use extensions as a means to buy more time, despite knowing you don’t have a solution, you may be seen as abusing this process.
What if I can’t file a notice?
There are a few scenarios wherein a director will not be able to file a notice of intention to appoint an administrator. These scenarios typically involve companies that are already entered into an insolvency procedure, either of their own volition or otherwise, or have been in administration within the last twelve months. For example, a company that has been served a winding-up petition will not be eligible for administration. Such cases act as disqualifying factors for the purposes of administration, so no notice can be filed. If your company is ineligible for administration, you may want to consider alternatives, such as Creditors’ Voluntary Liquidation.
Let Clarke Bell help you
If your company is struggling with financial issues, Clarke Bell can help you find the best option for dealing with the problem.
We have more than 28 years of experience in helping directors to find the right solution for their company. We can do the same for you.
Contact us today for your free, no-obligation advice.
The sooner you start to deal with your company’s business debts, the sooner you can get them sorted. Then you can move on to a fresh, new start.
