Administration Order

A Notice of Administration Order marks the beginning of a critical phase in the insolvency procedure for a company. It ensures that creditors and stakeholders are informed of the company’s new status and outlines the next steps in the administration process. For creditors, this notice signals the opportunity to work with the administrator towards a collective solution, while the company benefits from a period of protection from legal actions as it seeks to stabilise and recover. Understanding the importance of the Administration Order and its impact on the company is essential for all parties involved.

Notice of Administration Order: Key Insights into the Insolvency Procedure

A Notice of Administration Order is a formal legal document that signals the start of the administration procedure for a financially distressed company. This notice is issued when a court grants an Administration Order, appointing an insolvency practitioner as the administrator to take control of the company’s affairs. Understanding the role and impact of an Administration Order is crucial for creditors, shareholders, and other stakeholders involved in the company’s insolvency process.

What is an Administration Order?

An Administration Order is a type of insolvency procedure designed to protect a company from creditor actions while a licensed insolvency practitioner (the administrator) takes control of the business. The aim of the administration is to:

1. Rescue the company as a going concern (if possible).
2. Achieve a better result for creditors than would be possible if the company were liquidated immediately.
3. Realise assets to pay secured or preferential creditors.

The administration process begins when either the company itself, its directors, or one or more of its creditors applies to the court for an Administration Order. Once granted, the administrator takes over the management of the company, and a Notice of Administration Order is issued.

What is the Purpose of the Notice of Administration Order?

The Notice of Administration Order serves as an official communication to creditors, shareholders, and other stakeholders that the company has entered into administration. It includes key details such as:

• The date the Administration Order was granted by the court.
• The name and contact details of the appointed administrator.
• Information about the next steps in the administration process.

Once the notice is issued, creditors are generally prevented from taking legal action against the company without the permission of the court or administrator. This provides the company with a temporary “breathing space” to allow the administrator to evaluate the company’s situation and determine the best course of action.

How Does an Administration Order Affect the Company?

When a company is placed under an Administration Order, its directors lose their managerial powers, which are transferred to the administrator. The administrator’s primary goal is to maximise returns for creditors while trying to save the business if possible. The key effects of the order include:

• Moratorium on creditor actions: Legal actions, such as winding-up petitions or enforcement actions by secured creditors, are paused during the administration process.
• Control of the company: The administrator gains full control of the company’s operations and finances. They will assess the company’s financial health and may decide to restructure, sell assets, or, if necessary, liquidate the business.

What Happens After a Notice of Administration Order?

Following the issuance of a Notice of Administration Order, the administrator must create and present a set of administrator proposals to creditors within eight weeks. These proposals outline the strategy for managing the company, whether it will be rescued, restructured, or liquidated.

Creditors will have the opportunity to review and vote on the proposals. If accepted, the administrator will implement the plan, aiming to recover as much value as possible for creditors.

The Importance of the Notice for Creditors and Shareholders

The Notice of Administration Order provides creditors and shareholders with crucial information about the company’s status and the steps being taken to address its financial difficulties. For creditors, it signifies a pause in their individual recovery actions and an opportunity to engage collectively through the administration process. For shareholders, the notice highlights a significant shift in the company’s governance, as directors no longer retain control.

Useful Links for Further Reading:

• UK Government Insolvency Service: Comprehensive information on administration and other insolvency procedures.
• Companies House: Administration Guidance: Guidance on the administration process, including the issuance of a Notice of Administration Order.
• R3: Association of Business Recovery Professionals: Resources for understanding administration and the role of insolvency practitioners.

For more detailed insights into individual company Administration Orders, explore our Business data product which provides extensive Company Data on all UK-registered companies.