Tuesday, 3 March 2015

Extension of Administrator’s Powers

This is part of a series of blogs on the Small Business, Enterprise & Employment Bill (“the Bill”) that is proposed to come into force in April 2015.

Administrators’ powers have in recent years been subject to a comprehensive reform to enable them to be appointed outside of the Court process and to free them from the Court’s control, with a view to making it a more efficient system for restructuring company schemes and maximising returns to creditors.
However, under these reforms unsecured creditors have always had to wait for the company to be placed into liquidation and it is often the case that too few assets exist post-administration to make this a worthwhile exercise.
The Bill seeks to widen the role of Administrators, most of whom are appointed outside of the Court process, for an initial period of 12 months. As a start, the Bill seeks to allow appointed Administrators, with the consent of secured and unsecured creditors, to extend the initial period of appointment by a further period of 12 months (to 2 years) which provides an improved breathing space for Administrators to properly perform their duties.

Furthermore, particularly for unsecured creditors, the Bill also seeks to authorise Administrators to make limited payments to unsecured creditors out of administration. The amount which may be paid is usually calculated as a percentage of the assets recovered under a floating charge (which is often described as the “Prescribed Part”) and will mean that such payments reach unsecured creditors rather than being diverted as a result of the expensive regulatory costs of closing the administration and converting this process into a liquidation.
At Francis Wilks & Jones we have comprehensive experience in dealing with such matters, either seeking extensions on behalf of appointed Administrators, provide assistance to directors and advising creditors.