What is Special Administration?

When attempting to address major debts, a company may choose to enter administration in order to manage the path out of insolvency. It’s a process that falls under the Insolvency Act 1986, during which creditors cannot take action against the company.

However sometimes when a very large or important organisation is facing insolvency people talk about a process called “Special Administration”

What exactly is special administration?

The process, like ordinary administration, entails handing over control to administrators who will take steps to turn a company’s situation around if possible – or to wind it down in the most efficient manner.

A special administration, on the other hand, requires that client assets be recovered as soon as possible.

It also necessitates interaction with market regulators, which could be the Financial Conduct Authority or the Bank of England in the case of a financial firm, or Ofgem in the energy sector.

Importantly, special administration is a court-ordered action rather than one reached collaboratively by company directors and insolvency practitioners.

What is the purpose of a special administration? This is a sector-specific response.

• In the energy sector, the recent placement of energy firm Bulb into special administration reflected not only the organization’s size in terms of its multi-million-person customer base, but also the national necessity of the energy it supplies.
• When it comes to the financial sector and investment banks, the rise of special administration was precipitated by the failure of Lehman Brothers. Without a special administration, the economic impact of an investment bank’s failure could be even more damaging to the overall economy, necessitating the court-ordered process.
• If Royal Mail went into special administration, it would be to make sure that letters and essential items were delivered in a timely manner during any turnaround.  It would most likely be governed by what is called the Postal Act.
• Large healthcare providers would also be subject to any special administration due to the potential impact on ill people.

As special administration has the potential to involve the highest levels of government then the procedure tends to be lengthy.

Administrators will prepare plans within ten weeks of the special administration order, and they will consult with creditors, clients, and the relevant authorities.

After a successful court application, the special administration can be completed. It should be noted that it could also be suspended if a company voluntary arrangement is implemented.