ACCA F4 - Corp and Business Law (ENG)

334 21: Insolvency and administration  Part G Legal implications of companies in difficulty or in crisis

5.5 Duties of the administrator

The administrator has fiduciary duties to the company as its agent, plus some legal duties.

The administrator is an agent of the company and the creditors as a whole. They therefore owe fiduciary

duties to them and have the following legal duties.

Legal duties of the administrator

As soon as reasonably practicable after appointment they must:

 Send notice of appointment to the company.

 Publish notice of appointment.

 Obtain a list of company creditors and sent notice of appointment to each.

 Within seven days of appointment, send notice of appointment to Registrar.

 Require certain relevant people to provide a statement of affairs of the company.

 Ensure that every business document of the company bears the identity of the administrator and a

statement that the affairs, business and property of the company are being managed by him.

 Consider the statements of affairs submitted to them and set out their proposals for achieving the aim

of administration. The proposals must be sent to the Registrar and the company's creditors, and be

made available to every member of the company as soon as is reasonably practicable, and within

eight weeks.

 Whilst preparing their proposals, the administrator must manage the affairs of the company.

The statement of affairs must be provided by the people from whom it is requested within 11 days of it

being requested. It is in a prescribed form, and contains:

 Details of the company's property

 The company's debts and liabilities

 The names and addresses of the company's creditors

 Details of any security held by any creditor

Failing to provide a statement of affairs, or providing a statement in which the writer has no reasonable

belief of truth, is a criminal offence punishable by fine.

5.6 Administrator's proposals

The administrator must either propose a rescue plan, or state that the company cannot be rescued.

Having considered all information the administrator must within eight weeks (subject to possible

extension):

 Set out their proposals for achieving the aim of the administration; or

 Set out why it is not reasonable and practicable that the company be rescued. In this case they will

also set out why the creditors as a whole would benefit from winding up.

The proposal must be sent to all members and creditors they are aware of. It must not

 Affect the right of a secured creditor to enforce their security

 Result in a non-preferential debt being paid in priority to a preferential debt

 Result in one preferential creditor being paid a smaller proportion of their debt than another.

5.6.1 Creditors' meeting

The administrator must call a meeting of creditors within ten weeks of their appointment to approve the

proposals. The creditors may either accept or reject them. Once the proposals have been agreed, the

administrator cannot make any substantial amendment without first gaining the creditors' consent.

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