Commercial Law Services
The administration process has largely replaced the process of appointing a receiver, particularly following the coming into force of the Enterprise Act 2002.
This streamlined the process of appointing an administrator and was seen as a tool which could be used to achieve the rescue of a company rather than closing it down.
An administrator can be appointed either through the Courts or by an out of Court route but in each case the administrator has to consider whether the purpose for administration will be achieved. This is defined as
- rescuing the company as a going concern or;
- achieving a better result for the company's creditors as a whole than would be likely if the company were wound up (without first being in administration) or;
- realising property in order to make a distribution to one or more secured or preferential creditors.
The administrator may be appointed by the directors of the company and will have to work with them in order to learn about the company and to make a judgment about whether the company can be rescued as a going concern.
The administrator is also concerned with the general body of creditors and not just the person who appoints him, whether that be the company or a creditor.
In some cases the administrator will come to the view that part of the company may be saved if it is separated out from unprofitable parts of the business and the liability to pay existing debts and this quite often leads to a sale of the business in a slimmed down form, which is usually referred to as a Pre-Pack.
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