One of the more frustrating aspects of dealing with the appointment of administrators in recent times has been the requirement to serve ‘Notice of the Intention’ to appoint administrators on ‘prescribed persons’[1], including the Company, where there is no floating charge holder[2] involved. This requirement came to light in 2011, when the Court ruled that an appointment was invalid due to the failure to serve notice on the company[3]. There have since been conflicting decisions on the point, and this has introduced uncertainty into the process of out of court appointment. That uncertainty is compounded by the fact that the prescribed forms do not appear to envisage a situation where there is no floating charge holder but there is someone entitled to notice.

Most solicitors have therefore taken the view that it is easier to give formal notice of the appointment to the Company, rather than risk the appointment being set aside. In most cases, particularly where the appointment is being made by the directors of the Company, the Company can simply give consent to the appointment immediately on receipt of the ‘Notice of Intention’ and a ‘Notice of Appointment’ can then be filed. This minimises any delay which may be caused but the requirement to carry out this illogical extra step was often a cause for frustration on the part of the appointer and their advisors.

Fortunately, the position has now been made clear following the introduction of a new piece of legislation which came into force on 1 October 2015[4]. Among other things, the amendments made under the new legislation remove the requirement to serve notice on the ‘prescribed persons’ in out of court administration appointments where there is no floating charge holder[5]. It follows then that administrators can now be appointed out of Court simply by filing of a ‘Notice of Appointment’ in the prescribed form at Court and serving that notice on the administrators.

The amendment of the provisions of the Act will come as a relief to Insolvency Practitioners, potential appointers and their advisors who can now proceed straight to appointment without fear that the appointment could later be challenged on this illogical basis.

This post was edited by Lisa Smith. For more information, email blogs@gateleyplc.com.

[1] under paragraph 26 of Schedule B1 of the Insolvency Act 1986

[2] i.e. the holder of one or more forms of security over the whole (or substantially the whole) of the Company’s property and which complies with the requirements set out at paragraph 14(2) of Schedule B1 of the Insolvency Act 1986

[3] Minmar (929) Ltd v Khalatstchi [2011] EWHC 1159 (Ch)

[4] The Deregulation Act 2015, provisions bought into force by the Deregulation Act 2015 (Commencement No 3 and Transitional and Saving Provisions) Order 2015 (SI 2015/1732)

[5] Paragraph 6, Schedule 6, Deregulation Act 2015 (DA 2015)

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This blog is intended only as a synopsis of certain recent developments. If any matter referred to in this blog is sought to be relied upon, further advice should be obtained.