HOW DOES ADMINISTRATION WORK?
The Court will appoint an Administrator
who is a licensed insolvency practitioner
("an IP") to represent the interests of creditors
and shareholders in working with the company
to develop a plan of reorganisation to get
out of debt. A proposal is made to the creditors
by the company.
The proposal is usually a plan developed by
the company in conjunction with the IP in
order to achieve one of the four aims for
which an Administration Order can be made
by the Court. The proposal must be presented
to a meeting of creditors who may vote upon
the proposal. The size of a creditor's vote
is directly proportional to the amount of
the debt. A simple majority is all that is
needed to accept the proposals. In addition,
the creditors can also amend the proposal
and again a simple majority is all that is
required. The Administrator can also amend
the proposal although this will require ratification
by the creditors. Again a simple majority
must be obtained.
A Creditors' Committee is also formed, although
the purpose of this is merely to oversee the
administration and the role of the Creditors'
Committee is largely advisory.
The plan must be accepted by the creditors
and confirmed by the Court. However, even
if creditors or shareholders vote to reject
the plan, the Court can disregard the vote
and make any Order that it sees fit to make.
The purposes for which an Administration Order
can be granted must be one of the following:-
a) The survival of the company;
b) The approval of a CVA;
c) The sanctioning of compromise between the
company and third parties;
d) The more advantageous realisation of a
company's assets than would be achieved on
a winding up. |
