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From the 15th
September 2003 the Enterprise Act allows for both:
- the
out of court appointment of an administrator and
- the
court appointment of an administrator
Out of court appointment
This simplification
of the appointment process is only available in certain circumstances.
Out of court
appointments can be made by:
- the directors or shareholders
of the company
- the company bank (if the bank
holds a what is known as a qualifying floating charge).
Appointment of administrator by the director
or shareholders out of court
As a result of the Enterprise Act,
the directors (and shareholders) of a company now have a speedier
and cheaper route of getting their company under the protection
of an administrator. This route involves the appointment of
an administrator without there first being a court hearing.
The law anticipates, however, that the directors must be responsible
and pro-active in "going for a turn around" at an
early date.
If the directors leave the deterioration
of the affairs of the company to progress to such an extent
that any of the following circumstances have arisen then the
directors will not be able to appoint "out of court":
- if the company is already subject
to a winding up petition
- if the company is already in
liquidation
- where an administration application
has been made (and not yet determined) by somebody else
- eg. an application for an administration order to the
court by a creditor.
- where an administrative receiver
is already in place
- where, in the previous twelve
months, the company has been in administration or subject
to a company voluntary arrangement which has failed
- where the company is unable
to show that it is or is likely to become able to pay its
debts as they fall due
If any of the first five of these
circumstances obtain then the directors may still apply for
an administration order but only then by way of a court application.
The message for directors is:
"If you act early, before
your company is subject to massive pressure, you may appoint
an administrator out of court."
Appointment of an administrator
by the company bankers out of court
In certain circumstances a bank (which
holds a "qualifying floating charge") can also
appoint an administrator without there being a court application.
There is more on this website relating
to banks and administration orders.
Click on the left hand index heading "How do banks
get involved".
Court appointment of an administrator
Creditors of a company do not have
a direct "out of court" route to put an administrator
in place over a company which owes money to them.
Such creditors have to apply for a
court order that an administrator be appointed.
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