ACCA F4 - Corp and Business Law (ENG)

Part G Legal implications of companies in difficulty or in crisis  21: Insolvency and administration 335

5.7 Administrator's powers

The administrator takes on the powers of the directors.

An administrator of a company may do anything necessarily expedient for the management of the

affairs, business and property of the company.

Administrators have the same powers as those granted to directors and the following specific powers to:

 Remove or appoint a director

 Call a meeting of members or creditors

 Apply to court for directions regarding the carrying out of their functions

 Make payments to secured or preferential creditors

 With the permission of the court, make payments to unsecured creditors

The administrator usually requires the permission of the court to make payments to unsecured creditors.

However, this is not the case if the administrator feels that paying the unsecured creditor will assist the

achievement of the administration. For example, paying a major supplier to enable trading to continue.

5.8 End of administration

Administration can last up to 12 months.

The administration period ends when:

 The administration has been successful

 Twelve months have elapsed from the date of the appointment of administrator

 The administrator or a creditor applies to the court to end the appointment

 An improper motive of the applicant for applying for the administration is discovered.

The administrator automatically vacates office after 12 months of their appointment. This time period can

be extended by court order or by consent from the appropriate creditors.

Alternatively, the administrator may apply to the court when they think:

 The purpose of administration cannot be achieved

 The company should not have entered into administration

 The administration has been successful (if appointed by the court)

They must also apply to the court if required to by the creditors' meeting. Where the administrator was

appointed by a chargeholder or the company/its directors, and they feel that the purposes of

administration have been achieved, they must file a notice with the court and the Registrar.

5.9 Advantages of administration

Administration has many advantages for the company, the members and the creditors.

Advantages of administration

To the company The company does not necessarily cease to exist at the end of the process, whereas

liquidation will always result in the company being wound up.

It provides a temporary breathing space from creditors to formulate rescue plans.

It prevents any creditor applying for compulsory liquidation.

It provides for past transactions to be challenged.

To the

members

They will continue to have shares in the company which has not been wound up. If the

administration is successful, regenerating the business should enhance share value

and will restore any income from the business.

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