[BANKRUPTCY, INSOLVENCY & REHABILITATION PROCEEDINGS IN ENGLAND] 33
insolvency practitioner, and has broad powers, including power to operate the business, sell assets, and conduct litigation in the name of the company. Administrators, in common with liquidators, also have investigative powers and must report on directors’ conduct in the period before administration. Administration is only appropriate if the statutory objectives can be achieved- that is to rescue the business as a going concern, achieve a better result for creditors than would be achieved on liquidation, or at least to make a distribution to secured or preferential creditors. started : Administration may be started by court order on the application of creditors, shareholders, directors, or other interested parties. It can also be started without a court order, by directors, shareholders, or secured creditors who hold a qualifying floating charge. 4.3. What is a qualifying floating charge : A 4.2. How is the process floating charge is security over a class of assets which the borrower can deal with until an event happens (typically, liquidation, cessation of trade or a notice from the secured creditor) which “crystallises” the charge into a fixed charge . A qualifying floating charge is floating charge security over the whole or substantially the whole of a company’s assets and undertaking. Typical English law security for loans to English companies will include fixed charges (which rank in priority to floating charges and certain other third-party liabilities which are paid above floating charges) over real property and some other categories of
assets, as well as a qualifying floating charge over other assets. To be categorised as a fixed charge, the secured creditor must exercise sufficient control over an asset, and the courts will not simply rely on the description in the security document as “fixed” or “floating” charge security, as appropriate. 4.4. Pre - packs : In many cases, a prospective administrator will negotiate terms of a business sale in advance of their appointment, with the deal completed immediately on the administrators’ appointment. As the procedure is open to abuse, there have been increasing levels of regulation to require detailed disclosure where the buyer is deemed “connected” and evaluation of the appropriateness of the proposed transaction by an independent party. Despite this additional regulatory complexity (and cost), pre-packs remain a popular option for rescue of trading businesses, particularly where the value depends on continuing support of staff or customers, who can withdraw support on an announced insolvency. 4.5. Standalone moratorium : There is also the possibility of obtaining a moratorium for an initial 20 business days but extendable in periods for up to a year in total. It can be useful to hold off creditors while a transaction is completed or other formal restructuring procedure (such as one of the debt compromise tools outlined below) is put in place. 5. Debt compromise procedures 5.1. Company voluntary arrangements: This is a compromise with creditors
ILN Restructuring & Insolvency Group – Bankruptcy, Insolvency & Rehabilitation Series
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