I am reading in the press about companies filing a notice of intention to appoint administrators.What does this mean and can it give my company a breathing space?"
What is a notice of intention to appoint administrators?
A "notice of intention of appointing administrators" is where the company files, at court, a document that outlines that they intend to go into administration if a solution cannot be found to their immediate financial problems. Once this is notice has been sent to the court a moratorium is created over the company preventing any creditor from starting any legal action or continuing any existing legal action against the company without express permission from the court.
An example of the form is shown and if you click on it you can download the form.
Who can file this intention to appoint?
The directors of the company have the power to appoint an administrator but so to does the floating charge holder, usually the bank or factoring company. So it's possible that board decides to appoint an Administrator and the bank refuses and appoints its own. Although, if the Insolvency Practitioner is recognised by the bank and there is a quality plan to protect the business then there should not be a problem.
This breathing space is for 10 business days. It is possible to apply for an extension for another 10 business days if it looks like a "deal" is imminent although other reasons are of course acceptable. This "deal" usually involves another party that wishes to purchase the business or its assets and a little extra time is needed. However, it will need to be in the interest of creditors for an extension to be granted. Multiple applications to refile and ask for extensions are unlikely to be successful. Recent case law has indicated that extensions for just a bit of breathing space may not be granted at all. I.e the company really must be intending to appoint administrators. See this page for more details on this point
The ability to stop any legal action, including a winding up petition, is a powerful tool to save the business. The downside is that it is a very public event and this can be damaging to the business.
What are the advantages and disadvantages of going into administration.
So if you are thinking of going down the route of appointing an administrator then talk to us on 08009700539 as we can advise on whether this is the best option. It may be that a company voluntary arrangement or CVA is an appropriate alternative.
A guide for redundant employees
Administration case studies
Administration followed by a CVA
Putting a company into administration
Do you supply a business that has gone into administration?
Employees rights in administration
Going into administration - what does it mean?
How to buy a business in administration
Retrieve company goods in administration
Statement of Insolvency Practice 16 (SIP 16)
What is the voluntary administration process?
What is an administration sale?
What is TUPE?