Company Administrators: What are They, How to Appoint One & Why?
- Why Choose Administration and How to Engage an Administrator?
- What is a Company Administrator?
- Appointment of Administrator by the Company or its Directors
- Process of Administration Following Engagement
- What Qualifications Should an Administrator Have?
Why Choose Administration and How to Engage an Administrator?
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.
What is a Company Administrator?
A company administrator is a licensed insolvency practitioner appointed to manage the financial affairs of a company that can no longer pay its debts.
Administrators are responsible for overseeing the process of administration, which is one of the formal insolvency procedures available to companies.
The administrator’s role is to preserve the company’s assets, maximize its value and achieve a better outcome for creditors.
Appointment of Administrator by the Company or its Directors
Selection of an Administrator
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.
Appointment of the Administrator
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.
Process of Administration Following Engagement
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.
What Qualifications Should an Administrator Have?
An Administrator must be a licensed insolvency practitioner. Sometimes, insolvency practitioners are qualified accountants that have chosen to specialise in the insolvency sector. They must hold an insolvency license and have the following:
- 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.
A company administrator is a licensed insolvency practitioner who is appointed to manage the financial affairs of a company that can no longer pay its debts.
Administration is a formal insolvency procedure for companies that can no longer pay their debts, which can be done by order of the court, by a qualifying floating charge holder, or by the company or its directors.
To choose an administrator, it’s essential to select the best person for the job by searching through the Insolvency Practitioners Association or the government’s Insolvency Service, asking for references and discussing fees.
To appoint an administrator, the company or its directors must file a notice of intent in court, which imposes a 10-day moratorium on further creditor action.
An administrator must be a licensed insolvency practitioner with passed JIEB examinations, gained experience in insolvency work and be considered fit and proper by an authorising organization such as ACCA, ICAEW or the Insolvency Practitioners Association.
If you wish to discuss administration and assess if it’s suitable for your business, call us on 0800 074 6757 or use the live chat function below.