Chapter 6Companies■All business stationery must state that an administra-
tion exists and the administrator’s name must appear
alongside the company’s name.
■The administrator manages the company’s affairs gen-
erally and takes charge of its business and property.
This includes the trusteeship of any employees’ pen-
sion funds where the company has previously been
trustee. The administrator has power to carry on the
company’s business to deal with or dispose of its assets
and to borrow money in the company’s name.
■The administrator can apply to have transactions at
undervalue and preferences set aside just as a liquida-
tor can. Similarly, unregistered and late charges are
void against claims by him or her.
■The directors must submit a statement of affairs to
the administrator but they remain in office unless the
administrator removes them. An administrator can
also appoint new directors without reference to the
members.
■The administrator has eight weeks in which to make
proposals which may save the company from liquida-
tion and then to implement these proposals. The recom-
mendations must have been approved by a simple
majority in value of the company’s unsecured creditors.
The special case of employment
contracts
An administrator will often wish to retain the services of
the company’s employees at least for a period of time.
Ultimately they may be transferred to a new organisa-
tion that has taken over the company’s business as a
going concern or made redundant if the assets are sold
off without an effective rescue. The law contains pro-
visions to ensure that the administrator can pay the
employees or make them redundant at an early date in
the administration so that the employees are notleft to
work on for a period of time after the commencement
of the administration only to be told that the company
cannot pay them for the work they have done.
This is achieved by giving an administrator a window
of 14 days after the commencement of the administra-
tion to decide what to do about the employment con-
tracts and nothing done by the administrator during
that time is to be taken as adoption. The administrator
is free to consider the matter without being regarded
as having taken action to adopt the contracts. Failure
to actwill not amount to adoption either during or
afterthe period of 14 days. (See the decision of the High
Court in Re Antal International Ltd(2003) where the
administrator became aware of the existence of some
workers in France some 16 days after taking office. He
then dismissed them and had not adopted the contract
because he had not taken any ‘action’ to adopt the con-
tracts as Sch B1 requires.)
What happens then if the administrator does adopt
the contracts of employment and in the end is unable
to pay the employees concerned? The law provides that
the amounts owing to employees are charged on the
assets of the company in priority to the administrator’s
fees and expenses. This is what adoption means and
its effect. The sums involved and owing to employees
do not include any payments because of the admin-
istrator’s failure to give the proper contractual notice
to the employees. The amounts concerned are wages or
salaries including sickness and holiday pay and any con-
tributions to a pension fund that the company has not
paid. Payments in lieu of notice are excluded because
of the considerable problems that would otherwise be
faced by administrators who because of the failure of a
rescue attempt had to dismiss employees without proper
notice. Some of these employees might be senior staff on
long periods of notice and high salaries that could wipe
out the administrator’s remuneration and expenses
payments. So much so that firms of accountants and
insolvency practitioners would not have accepted
appointments of their staff as administrators.Ending the administration
Under Sch B1 the administrator will automatically
vacate office after one year from the date on which the
appointment took effect. This period may be extended
by the court for a period it may specify and by the con-
sent of each secured creditor and 50 per cent in value of
the unsecured creditors for a maximum period of six
months. There can be only one creditors’ extension. The
court can bring an administration to an end on the
application of the administrator. In most cases this will
be where the administrator thinks the purpose of the
administration has been achieved. A meeting of cred-
itors may require the administrator to make application
to the court or he or she may do so on his or her own
volition where the purposes of the administration can-
not be achieved. The termination of the administrator’s
office where the objects have been achieved will be notified
to the Registrar of Companies and to every creditor. Where
the objects of the administration cannot be achieved,195