Company Administrations

When a company goes into administration, the contracts of its employees are not terminated and the company’s employees are not automatically dismissed. 

However, administrators often make redundancies, especially if the business cannot trade in administration. 

If an administrator terminates a contract of employment, the liabilities of the company to its former employees, for example in respect of redundancy or unfair dismissal payments and unpaid wages that accrued before the administration, become unsecured claims and do not rank as an expense of the administration. 

Any “qualified liabilities” (which are restricted to wages and salary, such as holiday pay, sick pay and contributions to occupational pension schemes) under employment contracts adopted by the administrator are paid by the administrator in priority to the administrator’s own fees and expenses, floating charge holders and unsecured creditors. 

As with a company in liquidation, the administrator takes over control of the company's business and assets from the company's directors on appointment.  

In particular, the directors lose their powers of management in respect of the company and may not exercise such a power without the administrator’s prior consent.

The directors will also have the same duties in respect of the delivery up to the office-holder of the company’s assets and the provision of information pertaining to its business and affairs as with a liquidation.

Debts due to unsecured creditors are crystallised when the administrator is appointed.

If the outcome of the administration is the company’s survival, then the management of the company’s business and assets is returned to the company’s directors on the conclusion of the administration.  The directors of the company will then deal with the payment of unsecured creditors’ claims which arose before the company went into administration.

If the survival of the company is not possible, but sufficient sums are realised from the sale of the company’s business and/or assets to enable funds to be distributed to unsecured creditors, the administrator may be able in certain circumstances to pay a dividend to creditors, after payment of the costs and expenses of the administration.

Sometimes the outcome of the administration will be a CVA, which will then provide for how creditors’ claims will be dealt with. 

No.  Any petition for the winding up of the company must be dismissed or suspended. 

In addition, except with the consent of the administrator or the permission of the court, no steps may be taken to enforce security over the company’s property or to repossess goods in the company’s possession under any sale or hire agreement. 

Also, and again except with the consent of the administrator or the permission of the court, no other proceedings, execution or legal process may be commenced or continued, no distress may be levied, against the company or its property, and a landlord may not exercise a right of forfeiture in relation to premises let to the company. 

We were instructed to act on behalf of the joint administrators of a company that designed, manufactured and installed custom made luxury play equipment and children’s play areas and which installed specialised decking and boardwalks, as well as provided sawmill services, for clients based worldwide.

We advised and assisted the joint administrators in relation to their appointment, which was complicated by the presentation of a winding-up petition against the company shortly prior to the date upon which the director intended to appoint the joint administrators via an out-of-court appointment.  The winding-up petition was ultimately withdrawn allowing for the out-of-court appointment of the joint administrators to take place.

We also advised and assisted the joint administrators on the pre-packaged administration sale of the business and assets of the company to a connected third-party purchaser on deferred payment terms.

We acted for the joint administrators of a high-end online jewellery retailer that also operated in-store concessions at Selfridges on Oxford Street, London and at Liberty of London. 

As well as providing advice in relation to the security held over the company’s assets, we also acted for the joint administrators on the sale of the business and assets to a third-party purchaser and also advised on a variety of issues that arose during the course of the administration, such as in relation to retention of title and the delivery up of assets of the company held by a third party. 

We acted on behalf of the joint administrators of an umbrella company for ten legal practices.  The Solicitors Regulation Authority (SRA) intervened in the law firm shortly following the appointment of the joint administrators.  We advised and assisted the joint administrators in relation to their appointment, which was complicated by the presentation of a winding-up petition against the law firm group shortly prior to the date upon which the directors intended to appoint the joint administrators via an out-of-court appointment.  The presentation of the winding-up petition resulted in an application for an administration order being successfully made to the court. 

We also advised the joint administrators on the pre-packaged administration sale of the business and certain assets of the company to an unconnected third party, which included the transfer of client files and client monies.  In addition, we also advised the joint administrators prior to and following their appointment on certain regulatory issues arising and in relation to potential claims to be made in the administration.

We acted for the administrator of a former provider of funeral plans to thousands of individuals that was placed into administration due to the imposition of a regulatory regime by the Financial Conduct Authority to license the funeral plan industry and which resulted in some 20 companies being unable to continue in business.

We provided key advice to the administrator and his staff in relation to his appointment, led negotiations with a regulated plan provider in respect of the provision of funeral plans moving forwards, as well as providing advice and assistance in connection with the trust that held the plan holders’ funds and in relation to the eventual winding down of the company’s operations. 

We also provided detailed advice to the administrator in relation to a number of leases and advised the administrator on the potential exit routes from administration. 

We acted for the joint administrators of a company that provided brokerage services between wine buyers (customers who were part of an online members club) and wine suppliers (wine producers and wine merchants) located internationally through an online trading platform.

We advised the joint administrators on the pre-packaged sale of the business and assets of the company to a connected third party and on the creation and registration of security provided by the purchasing third party that was required to be granted over the purchaser’s assets in favour of the company and the joint administrators to secure the payment of the deferred sale consideration under the sale and purchase agreement.

We also subsequently advised the joint administrators in relation to the enforcement of the security due to the purchasing third party’s non-payment of the deferred consideration due under the sale and purchase agreement.

We acted on behalf of a creditor in connection with the administration of a commercial property developer.  In particular, we provided advice in relation to an uncompleted property development consisting of student accommodation over which our client had a second ranking legal charge. 

We advised and assisted the client in relation to their position in connection with the sale of the student accommodation via a pre-packaged sale out of administration whereby the student accommodation was sold to a third party.  Our advice and assistance included engaging in correspondence with the joint administrators and their solicitors, the third-party purchaser and other connected third parties and their solicitors.  We also assisted with an application to the Land Registry to protect our client’s position.

We acted for the former administrator of a firm of solicitors that specialised in personal injury claims and which entered administration in November 2021.  We successfully applied to the court for the extension of the administration for a period of 2 years in order that our client could apply to the court to determine the basis of his remuneration and to recover outstanding sums due to the company in administration following files being transferred from the company in administration to other personal injury law firms. 

We also advised our client in relation to queries received from the SRA regarding the company’s financial position after it entered administration and in relation to premises leased by the company in administration.

We were instructed to act by the trustees of a self-administered pension scheme in connection with the administration of a national chain of restaurants where the scheme was a landlord of a key restaurant premises which was a profitable part of the portfolio of premises held by the company in administration.

Our client encountered difficulties in engaging with the joint administrators.  This required our intervention in relation to recovering all forms of rent due to our client under the lease with the company in administration. 

We also advised our client on the need for a potential application to court for forfeiture of the lease in the event they were unable to recover the amounts due from the company in administration.

Finally we provided advice to our client in relation to the need for them to secure a satisfactory offer of assignment of the lease of the premises from the company that entered into an agreement with the joint administrators to continue operating several restaurants.