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When a company or a partnership gets has financial problems it is at that stage either an administrator or administrative receiver may be engaged.
The administrator has the task of getting the financially troubled company trading again, if it is indeed a possibility given that the company concerned may be unable to pay debts as they fall due.
Administrators may be appointed by:-
* A charge holder of qualifying floating charge over its assets.
* The company or any of its directors.
* Application to the Court by a Creditor, Partner or Director.
The responsibility of the administrator is to attempt to keep the business operating as a going concern and if this cannot be achieved then attempt to get a better financial outcome for creditors than if it were to be wound up. If these actions are impossible then the company's property will be sold by the administrator. This will allow some payment to secured or preferential creditors.
A proposal is achieved by the company working with the IP achieving one of four aims for which Administration Orders can be made by the directors, creditors and the Court. That proposal is to be presented at the creditors meeting who then take a vote on that proposal. The creditor's vote is directly proportional to the amount of the debt. A small majority is all that is required for acceptance of the proposal. Creditors may amend a proposal and once again a simple majority is all that is required. The Administrator may amend that proposal following agreement with creditors the creditors and gaining a simple majority.
If felt necessary a Committee comprising of the creditors may be arranged as an advisory panel to monitor the proceedings.
Creditors must accept the proposal and a Court will confirm it. However even if creditors have rejected it the Court may act the order upon which it decides.
The granting of an Administration order is dependant upon one of the following:-
Greater realising of assets as opposed to the company being wound
up.
The company can pull through the issues and continue to trade viably.
Property value realisation for secured and preferential creditors.
The IP will produce a draft proposal with the business concerned that allows it to repay only part of the debt that has been negotiated with the creditors. The purpose of this is to throw a life line to the business.
Following creditor, administrator and company input to a plan a court may make an order to implement that plan however timescales can be months or even years.
An advertisement in "The London Gazette" will have been placed by the IP. You may receive information from the company if you are a shareholder.
You may be asked to vote on the plan of reorganisation, although you may not get the full value of your investment back. In fact, sometimes shareholders don't get anything back, and they don't get to vote on the plan.
If you have a voting entitlement the IP will send to you:-
A proposal copy. (spells out investor rights and what or not
to expect.)
Creditors details re voting entitlement.
Proxy voting form.
Date of creditors meeting.
Upon conclusion a shareholder may be required to send back existing shares to the administrator, if so requested, after which new shares for the reorganised company will be issued to you. NB! This new issue shareholding may well be decreased in value and actual shares.
An Administration Order freezes approaches and any proceedings commenced by the company’s creditors.
An Administration Order, once approved by creditors, ceases all proceedings against the company whether in motion or being applied for, without exception.
Administration also applies to a partnership.