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Duties

An Administrator must act first and foremost in the best interests of ALL creditors as a body.

What Is An Administrator?

An Administrator is the Insolvency Practitioner that is responsible for running a company that has entered Administration.

What Is Administration?

Administration is an insolvency procedure under the Insolvency Act 1986 that can be used by a Company and its Directors to attempt to rescue the business by stopping creditors from taking action against a company, such as winding it up and forcing it into Compulsory Liquidation. There is an effective freeze on creditors taking enforcement action against the company. This is known as the moratorium.

The purpose of the moratorium is to give the company that is in financial difficulty a breathing space to attempt to rescue it as a going concern and restructure, so that it can be returned to profitability.

What Are The Objectives Of Administration?

The objectives or purposes that are permitted in the legislation are:

  • Rescue the company as a going concern
  • Obtaining a better result for creditors than would arise on a Liquidation
  • Realising company assets to make a distribution to secured or preferential creditor

You cannot use Administration to deal with a company’s insolvency if you are not seeking to fulfil one or more of these three statutory purposes.

What Is The Key Duty Of An Administrator?

The key duty of an Administrator is to act in the best interest of creditors as a whole.

That means that an Administrator’s duty is not to act in the best interest of individual creditors if their position does not match the creditors as a whole.

General Duties Of An Administrator

In general, an Administrator has the following duties:

  • to act fairly and honourably
  • to manage the company’s affairs as set out in the Administrator’s Proposals document
  • to act quickly and efficiently
  • to act with reasonable care and skill of an ordinary skilled and careful insolvency practitioner
  • to take reasonable care to obtain the best price obtainable for the company assets
  • to act with purpose and adhere to relevant considerations when performing functions
  • to act with consideration and loyalty to company creditors

Insolvency Code Of Ethics: What Are The Duties Of An Administrator?

It is the duty of an Administrator to act in accordance with the Insolvency Code of Ethics.

A failure to act in accordance with the Insolvency Code of Ethics could be considered a failure of duty to act with reasonable care and skill. The duty includes the need to act with integrity and objectivity.

Record Keeping: What Are The Duties Of An Administrator?

The record-keeping duties are to be able to justify the acts of the Administrator with reference to the considerations that led to a decision and the records should enable a third party to see that.

The duty to keep records only goes so far as it is as much a regulatory duty as anything else.

Duty To Consult Directors And Shareholders: What Are The Duties Of An Administrator?

There is no duty to consult company Directors and Shareholders. In the case of One Blackfriars Ltd, Re [2021] EWHC 684 (Ch) the following was noted:

The JLs submitted that there was a legal duty on administrators to consult with directors as to the value of the Company or the Site and more generally. The FAs submitted that there was no such duty. I agree with the submission of the FAs. As Snowden J. pointed out in Davey v Money [2018] Bus LR 1903 at [287], in many cases an administrator will be appointed because the directors of a company, appointed by shareholders, have presided over the decline of a company into insolvency. The administrator is put into office to bring independent judgment to bear and to manage the company in the interests of the creditors of the company in accordance with the statutory framework of the Insolvency Act 1986. A duty to consult with directors or shareholders would cut across and interfere with that legislative framework of duties. If there were such a duty it would not in any event extend to a duty on administrators to share all the information they had received from third parties or other creditors with the directors or shareholders.

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