Administration is one of some formal insolvency procedures available to companies that can no longer pay their debts. There are three routes a company can take:
- By order of the court – an application for a court order can be made by one or more company creditors, a liquidator or the supervisor of a company voluntary arrangement (CVA);
- Appointment by a qualifying floating charge holder – often made by a bank or other commercial lender;
- Appointment by the company or its directors – the company itself or its directors can file a notice of appointment.
Your choice can have a significant impact on the outcome that’s achieved, so it’s essential you choose the best person for the job. You can search through the Insolvency Practitioners Association or the government’s Insolvency Service, or by talking to existing contacts, you may have such as an accountant or a solicitor.
It’s essential, before you make an appointment, which you discuss how the insolvency practitioner’s fees will be calculated, and ask for an estimate of the overall cost. You should also ask for examples of similar cases the insolvency practitioner has worked on and details of the outcomes that were achieved. Wherever possible, you should also ask for references from previous clients before making your choice.
If your company is in debt and can’t pay the money it owes then, as a company director, you may choose to put the company into administration yourself. In this case, you will have to appoint an insolvency practitioner, and pay their fees. This can be done by resolution of the members or a formal or informal decision of the directors. Where the directors formally agree to appoint an administrator the decision must be by majority vote. If the decision is taken informally, it must be unanimous.
For an appointment, a document called a notice of intent must be filed in court. This document can be filed by the company itself, the company directors or a floating charge holder such as the bank. Once the notice of intent has been filed with the court, an initial moratorium of 10 days is imposed which means any further creditor action has to receive court agreement. This allows a company to move away from the immediate threat of liquidation.
A licensed insolvency practitioner who will usually be a qualified accountant or insolvency specialist is eligible for the role. They must hold a license and have:
- Passed the insolvency (JIEB) examinations;
- Gained experience in insolvency work;
- Satisfied an authorising organisation that they are fit and proper to act as an insolvency practitioner.
Registered professional bodies for insolvency practitioners include the Association of Certified Chartered Accountants (ACCA), the Institute of Chartered Accountants in England and Wales (ICAEW) and the Insolvency Practitioners Association.
If you wish to discuss administration and assess if it’s suitable for your business, call us on 08000 746 757 or use the live chat function below.