Administrator Powers

An administrator is a person placed into a company to take control and run it in order to try and save it. Administrators are also fully qualified insolvency practitioners. If the company can't be saved then the administrator will try to get the best result for all the secured creditors than if it just folded. The main reason an administrator is called in to a business is when the secured Creditors are worried that they won't get their money back as the company is showing signs of failing. The court normally appoints the administrator, but there are a few other people who can call in the Receiver, usually the creditors or their representatives.

If the administrator can't save a failing company and bring it back to trading at a profit, they will then fold the company before it is worthless. They sell off the assets to raise capital in order to pay the creditors, or if possible, they will sell the company as a whole.

Administrator Aims

The main aim of the administrative receiver is to get back the money that is owed to the secured lenders. They are not concerned with getting the best deal for you and are not interested in your woes, although they do protect you from the wrath of the creditors, as they are in effect a hired gun.

The administrator will look into the affairs of the company and offer each creditor a proposal from the company with their recommendations. The proposal contains the reason for which the administrator wishes to apply for an Administration Order from the court. The proposal must be presented at a Creditor Meeting.

Each creditor will get a vote as to whether they want to accept or reject the proposal. Each creditor's vote is proportional to the amount of money they are owed. The bigger the amount the more weight their vote carries. To get the proposal rejected or accepted only needs a small majority.

The four reasons the administrator can use to apply for an administration order are:

• Agreement on a CVA (company voluntary agreement).
• Survival of the company.
• Achieving a better price for the assets of the company than would be achieved by folding the company.
• A compromise reached between the company and the creditors.

For the court to make the order the reason must be accepted by the creditors. However, if the shareholders or the creditors choose not to accept the proposal the court can ignore their vote and go ahead and order the administration order based on the administrators recommendations regardless.

There will also be creditor's committee formed to oversee the administration of the company, although their role is more advisory than hands on. They don't have any actual powers as the Official Receiver under the supervision of the court carries out the administration process. The administrator, however, is not interested in the claims of unsecured creditors and will only give them money back after all the secured creditors have been paid back. In most cases unsecured creditors never see a penny of their money. This decision is not a personal one on the behalf of the receiver; they actually have no authority to deal with unsecured creditors.

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