Administration Order
An Administration order is a Court Order placing a company that is, or is likely to become, insolvent under the control of an Administration following a petition by the company, its directors or a creditor. The purpose of the order is to achieve a survival of the company’s business, allow a reorganization or ensure the most advantageous realization of its assets while protecting it from action by its creditors.
Administrator
A licensed insolvency practitioner appointed by the Court under an Administration order to achieve the purposes set out in the order. The Administrator will need to produce a plan, known as his proposals, for approval by the creditors to achieve the purpose.
Creditors’ Committee
A creditors’ committee may be formed to represent the interests of all creditors.
Insolvency Act 1986
Primary legislation governing insolvency law and practice. Nevertheless, many other statutes and statutory instruments are also relevant. A reorganization for the protection of the creditors is within its scope.
Insolvency Rules
The Insolvency Rules 1986, as amended, provide the detailed working procedures for the provisions of the Insolvency Act 1986.
Meeting of Creditors
A meeting of creditors is to be held within three months after the making of the order to consider the Administrator’s proposals and establish a creditors’ committee if necessary.
Petition
A written application to the Court for relief or remedy
Petition and Witness Statement to Support Petition
The petition and witness statement along with independent persons report are legal documents filed in court to initiate the Administration order.
Preference
A payment or other transaction made by a company, which in the event of the company entering into insolvent liquidation places a creditor in a better position than they would have been otherwise. An Administrator may recover sums that are found to be preferences if the transactions took place within a period of either two years (where the creditor is a connected person) or six months (in other cases) and at the time of the transaction the company was insolvent or became insolvent as a result of it.
Preferential Creditor
Defined in Schedule 6 of the Insolvency Act 1986. Has priority when funds are distributed by a liquidator, administrative receiver or trustee in bankruptcy.
Rule 2.2 Report
A report by an independent person to the effect that an appointment of an administrator for the company is required. This report specifies the purposes of the Administration order and how it will be achieved.
Scheme of Arrangement
A term normally used to describe a compromise or arrangement between a company and its creditors or members or any class of them. There are two possible types of schemes. The first is under section 425 of the Companies Act 1985, which may involve a scheme for the reconstruction of the company. If a majority in number representing three-fourths in value of the creditors or members or any class of them agree to the compromise or arrangement, it is binding if sanctioned by the court. Section 425 may be invoked where there is an Administration order in force in relation to the company. The other possible type of scheme arises under section 1 of the Insolvency Act 1986 in relation to company voluntary arrangements. If a majority in value representing more than three-fourths of the creditors agree to the compromise or arrangement set out in the CVA proposal, it will be approved.
Secured Creditor
A creditor with specific rights over some or all of a debtor’s assets. A secured creditor gets paid first out of the proceeds of the sale of the secured assets.
Unsecured Creditor
Strictly, any creditor who does not hold security. More commonly used to refer to any ordinary creditor who has no preferential rights, although, in fact, preferential creditors will almost always also be unsecured. In any event, unsecured creditors rank ahead of shareholders but behind other classes of creditors.
|
