Administration in United Kingdom law

It was first introduced following the Cork Report's priorities for transparency, accountability and collectivity and, crucially, fostering a rescue culture for business.

[1] In general the conditions for a court to grant an administration order are first, whether the company is insolvent, or 'is or is likely to become unable to pay its debts'.

[2] In Re Harris Simons Construction Ltd Hoffmann J held that 'likely to achieve the purpose of administration' meant a test lower than balance of probabilities, and more like whether there was a 'real prospect' of success or a 'good arguable case' for it.

[4] But an important change since the Enterprise Act 2002 is that it is also possible for a director and, crucially, the holder of a floating charge over the company's whole property to apply for appointment of an administrator out of court.

[7] The effect is that the holder of a qualifying floating charge is in a robust position to have their preferred insolvency practitioner installed.

The concern in the business community is thus that a plan gets foisted on creditors without much time for consideration that works most in favour of the people who ran the company or the large secured lender.

Here the sale of a cigarette vending machine business was to the company's competitors, and so the deal was sufficiently "arm's length" to raise no concern.

Here the administrator did not treat the Revenue as having sufficient votes against the company's management buyout proposal, but the court substituted its judgment and stated the number of votes allowed should take account of events all the way in the run up to the meeting, including in this case the Revenue's amended claim for unlawful tax deductions to the managers' trust funds and loans to directors.

In Oldham v Kyrris it was held that creditors may not sue administrators directly in their own capacity, because the duty is owed to the company.