In UK law, the administration regime is governed by the
Insolvency Act 1986, as amended by the
Enterprise Act 2002. An "administrator" can be appointed without petitioning the court by the holder of a
floating charge (created since 15 September 2003), by the company or by its directors. Other creditors must petition the court to appoint an administrator. The administrator must act in the interests of all the creditors and attempt to rescue the company as a
going concern. If this proves impossible the administrator must work to maximise the recovery of the creditors as a whole. Only then may the administrator attempt to realise property in favour of one or more secured creditors. A firm is usually in administration for no more than 12 months, after which an extension from the court can be produced at the courts discretion. Administration is analogous to going into "
Chapter 11" in the United States, although there are certain key differences, mainly stemming from the fact that English law does not include the
debtor in possession concept. During the reorganisation period, as a result, the administrator usually runs the business rather than the directors, and any additional liquidity requirements effectively have to be met by funds provided by existing creditors rather than by any
super-senior '
DIP financing'. The administrator is an officer of the court and an agent of the company, and is not personally liable for any contracts they make on behalf of the company. They have the power to do anything necessary or expedient for the management of the affairs, business and property of the company. The new administration regime introduced by the
Enterprise Act 2002 replaces the previous situation where
administrative receivership was available as an alternative to administration, which has traditionally been a more rescue-oriented insolvency regime. This regime allowed the holder of a
floating charge to appoint an administrative receiver to realise assets in his favour, and also to block an administration order sought by a borrower. This was felt to be too favourable to the floating charge holder at the expense of other creditors. Holders of a floating charge created prior to 15 September 2003 retain their right to appoint an administrative receiver, but all purported rights to do so created after that date will be construed as rights to appoint an administrator, subject to certain specific, rare exceptions. A court order is issued that forbids any form of legal or insolvency action without the court's permission. An application to the court for an administration order may be made by the company, the directors, a creditor or any combination of them. The
Enterprise Act 2002 amended the
Insolvency Act 1986 to provide an out-of-court process to appoint an administrator to the holder of a floating charge or the company or its directors. This is considerably cheaper and simpler than the previous system, which involved an application to court.
Administration order In the United Kingdom, an administration order is a process designed to protect limited companies from their creditors while a
debt restructuring plan is carried out and presented to creditors and courts. This administration order process requires a licensed
insolvency practitioner to act as the administrator appointed by the court. The administration order does not concern joint debt.
Pre-pack administration Pre pack is an insolvency procedure where a company arranges a deal to sell its assets to a buyer before appointing administrators to facilitate the sale. It is a legal way of selling the business on to a trade buyer or third party. A pre-pack is the process of selling the assets of a company immediately after it has entered administration. It is sometimes the case that the previous directors or management purchase the assets of the company from the administrator and set up a new company. This process has advantages in that it enables the administrator to realise a greater amount for the assets due to business continuity and that the goodwill of the company is preserved. The employees of the company are also usually transferred to the new company, preserving jobs. Pre-packs have attracted criticism because of the appearance it gives to unconnected parties that the company has just continued without its creditors. SIP 16 was introduced in January 2009 to assist Insolvency Practitioners in pre-pack cases. It was designed to make the process more transparent for creditors, and to ensure that fair value was obtained for the assets. In November 2009, the
Office of Fair Trading announced a study into corporate insolvencies, with particular focus on pre-pack administrations, to report on whether the insolvency market is operating efficiently, with enough freedom of competition between insolvency practitioners and whether consumers and creditors are being treated as fairly as possible. An example of a pre-pack is the sale of the assets of
Cobra Beer to
Coors immediately after Cobra Beer entered administration. This allowed the brand to continue and saved jobs, but also left suppliers out of pocket by an estimated £75 million.
Individual administration order in England, Wales and Northern Ireland In this process, a debtor who has enough money left over after priority creditors and essential expenses may be able to arrange an individual voluntary arrangement. (Debtors with less serious problems may prefer a
debt management plan.) ==Republic of Ireland==