The most common route into Administration is for the company directors to call a meeting and hold a vote. If the majority of the directors agree, the company can apply to the court for an Administration Order. This is a quick and easy way to enter into Administration as you can call the meeting at short notice. There’s also no requirement for a court hearing as long as there is no outstanding Winding Up Petition against the company.
However, the situation is not always quite so straightforward. For example, what happens when there are two directors and one wants to put the company into Administration but the other opposes it?
Making decisions about the future of a struggling company is never easy, but it is even more problematic when there are two directors with opposing views. In a recent case in the High Court - Abigal Boura v Lyhfl Limited - one company director applied to the court to appoint an administrator on the basis that the business could not pay its debts. However, there was also another company director who opposed the appointment.
The court subsequently had to decide whether one director could apply to the court to appoint an administrator when there was no board majority or valid resolution in favour of the application. In its judgement, the court determined that where a company had two directors and one opposed the application, a single director could not act alone in appointing an administrator.
Although one director cannot appoint an administrator when the other one opposes, there have been cases where the court has appointed administrators on the application of a sole director. In these cases, the second director has not actively opposed the application. The applications were also considered to be urgent, with the court needing to act quickly to protect the company and its creditors.
If your company is facing financial difficulties or is struggling to pay its debts, putting it into Administration could be the best option. The company directors and its shareholders can voluntarily appoint an administrator via a majority vote. Although it’s less common, a floating charge holder, such as a bank, can also force a company into Administration via a court order.
If you put your company into Administration voluntarily, you can decide who to appoint as the administrator. You must file a Notice of Intention to appoint an administrator to the court. At this point, an interim moratorium will begin, which protects the company from existing or pending creditor action for 10 business days so you can explore viable solutions to your problems. You can then file the Notice of Appointment, which details the name, address and contact details of the administrators you have appointed. At this point, a new moratorium will begin that lasts for the duration of the administration process.
If you are unable to pay your staff, cannot pay debts when they are due and are coming under increasing pressure from your creditors, we can help you formulate a plan to get back on track. Contact our licensed insolvency practitioners for a free, same-day consultation or arrange a meeting at our network of offices throughout the UK.
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