|
The rights of recovery that banks have
under the Enterprise Act dramatically increases after the
15th September 2003.
The bankers to a company are unsecured
creditors unless, as is usual, the bank have registered a
debenture with Companies House.
A "debenture" is often called
a "fixed and floating charge".
After the 15th September 2003 a banks
rights depend upon whether their charge was registered before
or after that date.
Floating charges registered before 15th September
2003
If a banks charge was registered before
15th September 2003 the bank has the choice, on the insolvency
of one of their customers to:
- either do nothing and let an
insolvency process commence or
- appoint an administrative receiver
of their choice or
- appoint an administrator of
their choice
Company directors cannot get away,
therefore, from the fact that the company bankers will always
have the whip hand in deciding what rescue/insolvency step
will be followed. (assuming of course that the bank has the
appropriate registered charge)
The bank can appoint an administrative
receiver - who is a person responsible only to the bank.
Or, the bank may appoint an administrator
of their choice - but an administrator is a person responsible
to creditors as a whole.
Post 15th September 2003 while
banks will have the above choice their may be a tendency to
appoint administrators so that the bank can evidence that
they are taking account of the interests of creditors as a
whole when they make appointments.
The appointment by a bank of either
an administrator or an administrative receiver is an "out
of court" process.
Floating charges registered after 15th September
2003
A banks rights are slightly reduced
in respect of charges which are registered after the provisons
of the Enterprise Act come into effect.
In relation to any such post commencement
charges a bank will not be able to appoint an administrative
receiver but will stil be able to appoint an administrator
out of court.
What does all this mean?
Since the company bankers have the
powers of saying "yae" or "nay" directors
should continue to keep those bankers fully informed about
their thoughts and intentions. Keeping the bank on side
in a turn around / administration is absolutely essential.
Who else would provide finance in the
turn around period?
|
