Prior to 2002, creditors holding a charge over a company’s assets (usually a bank), had the right in certain circumstances to appoint a receiver. A receiver was an Insolvency Practitioner who acted on behalf of the creditor. Its duty was to take custody of the company’s assets and exercise powers with a view to satisfying the debt owed to the creditor.
In 2002 the law changed and restricted the use of this procedure to certain types of companies or floating charges created prior to September 2003. For this reason, administrative receiverships are rare (in 2018 there were only a handful in the UK).
LPA Receivership and Fixed Charge Receivership
LPA receiverships and fixed charge receiverships are different to administrative receivership.
Under the Law of Property Act 1925 (LPA), creditors (usually banks/lenders) that hold a fixed charge over property have a statutory right to appoint an LPA receiver.
A fixed charged receivership is when a creditor who has a fixed charge over a company’s assets, has the power under the terms of the security documentation to appoint a receiver.
In these situations the receiver will have powers to help realise the debt owed to the creditor by taking charge of the assets/property. This could mean selling the assets that are the subject of the charge or managing them and collecting the rent for the benefit of the lender.
What can you do if a receiver is appointed in respect of your company’s assets?
We are experienced in advising both lenders in respect of the appointment of receivers, receivers in relation to legal issues arising from the exercise of their powers and companies facing receivership which gives us valuable experience in advising on this specialist area.
If you receive a formal demand from a lender indicating their intention to appoint a receiver, or a receiver has been appointed in respect of your company, it is critical that you seek urgent advice.
We regularly advise companies on the validity of the appointment of a receiver, their rights and the best course of action. We offer practical, commercial advice rather than just restating the law.
We act for insolvency practitioners, lenders and business owners on all aspects of corporate restructuring and insolvency.
Our client base includes a number of North West based and nationally based insolvency practitioners, most of whom we have advised for many years. They welcome our practical and commercial advice and our responsiveness. We advise them on the full range of insolvency processes.
Where commercial lenders have clients who are struggling to pay their debts, or are involved in an insolvency process, we assist the lenders in recovering their funds.
When businesses are having financial difficulties, we are able to advise the owners on the best solutions for their situation, whether that be a formal process such as administration, or an informal restructuring, a managed turnaround and refinance or just general commercial and practical advice.
We also regularly advise purchasers who are buying distressed businesses that may or may not be in an informal insolvency process.
There are a range of procedures available to struggling businesses including:
Insolvency is defined in the Insolvency Act 1986, but broadly it means when a company does not have sufficient assets to discharge its liabilities as they fall due.
If this occurs, there are options open to the company owners and other stakeholders, one of which is administration. Administration is an insolvency process where an insolvent company is placed under the control of an insolvency practitioner (IP) to enable the IP to achieve objectives laid down in legislation.
How does a company enter administration?
There are two ways for a company to enter administration:
By court order – an application for a court order can be made by creditors i.e. those owed money by the company, the company itself, its directors, a liquidator, a supervisor of a CVA or pursuant to legislation.
By an out of court process by lodging certain documents with the court – this process is only available to the company or its directors or a party with a qualifying floating charge (usually a bank or commercial lender).
Why would a company or its directors put it into administration?
From the date that an application is made to court or a notice of intention to appoint administrators is filed, a moratorium in respect of claims will apply to protect the company against actions from creditors. In general terms this means that creditors will not be able to issue proceedings, HMRC will not be able to distrain or issue a winding up petition against the company and the landlord will not be able to forfeit its lease. If the company is concerned that creditors may issue proceedings then administration can provide some short term protection, allowing the company to restructure.
Often companies that enter administration end up being sold or at least their businesses and assets do. Sometimes a sale is agreed prior to the company going into administration and it may be a term of completing the sale that the company is put into administration first. Such sales are known as pre-packs. Pre-packs can be a relatively quick and smooth way to continue the business with as little disruption as possible.
What are the objectives of the administration?
The first objective of an administrator is to rescue the company so it can carry on as a going concern.
If this isn’t possible then the aim is to achieve a better result for the company’s creditors than would be likely if the company was put into liquidation. If such a better result cannot be achieved, then the objective is to realise the property of the company and distribute the proceeds to the company’s secured and preferential creditors in the first instance.
Next steps
If your company is experiencing financial difficulties and you are considering administration please get in touch. We can provide initial advice about your restructuring options and introduce you to an IP.
If you are considering purchasing a business or assets from an administrator, please get in touch. We have a wealth of experience in structuring pre-pack sale agreements and advising individuals and companies on purchases of distressed businesses and assets
Ever-changing employment law is a major feature of modern business life and failing to properly manage these vital issues can seriously damage your businesses finances and reputation.
To help you stay informed and protected in every area of your employment activity, Bermans are part of the Praesidium Employment Law Protection network.
Discrimination arising from disability is where an employer treats an employee less favourably because of ‘something’ which results from their disability, and which can’t be justified. The Employment Appeal Tribunal has recently looked at whether it is discriminatory to discipline an employee for failing to follow an instruction they mistakenly think will exacerbate their disability.
Local high streets, town centres and out of town retail parks are all sporting empty units as retailers continue to find market conditions tough. In the last 12 months we have seen some big names disappear such as House of Fraser, HMV and Better Bathrooms and we have seen other retailers reduce their portfolio by closing stores such as Marks and Spencer and John Lewis.
Commercial landlords will normally have an early warning when businesses are struggling as they will often default on rental payments. Depending on the terms of the lease, landlords may have the right to forfeit the lease for non-payment, bringing the lease to an end and giving the landlord an opportunity to re-let the property. But in these tough times is that the landlord’s best option?
Following the Taylor Review on Modern Working Practices, the government has proposed changes to employment law. The following changes will take effect from April 2020:
On the 6 May 2019, a 12 week consultation by the Government on proposed changes to Stamp Duty Land Tax (SDLT) rates for non-UK residents will come to an end.
This is the Government’s latest scheme to assist people to get on the property ladder. Their main focus is on building more homes but, as this takes time, they are looking at solutions that will have a more immediate effect.
The changes were initially proposed by Theresa May back in Autumn 2018, citing evidence that the purchase of property in England and Northern Ireland by non-UK residents was pushing up house prices for UK residents. At that stage the Government mooted introducing an additional surcharge on properties bought by non-UK residents of either 1% or 3%.
The rush hour commute into Manchester City Centre ground to a halt one morning last month as a disgruntled subcontractor chose to block one of the key routes with plant hire vehicles. The protest was against of non-payment by Dawnus Construction, the main contractor appointed by Manchester City Council to carry of a £15 million road improvement scheme in Manchester and Salford.
The subcontractor, Total Plant Hire (TPL), had supplied plant and machinery to Dawnus for the scheme. When Dawnus failed to pay under the terms of the contract and TPL couldn’t get through to anyone at Dawnus or the Council it took drastic action. Sadly the action was in vain as Dawnus entered Administration that same week. TPL was said to be owed £300,000 by Dawnus. So what can TPL do to recover its money?
The recent high-profile case against Harvey Weinstein and the treatment of the hostesses at the Presidents Club Dinner have shone a spotlight on the use of non-disclosure agreements in employment contracts and this has led to the Government taking a closer look at them.
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Ever-changing employment law is a major feature of modern business life and failing to properly manage these vital issues can seriously damage your businesses finances and reputation.
Discrimination arising from disability is where an employer treats an employee less favourably because of ‘something’ which results from their disability, and which can’t be justified. The Employment Appeal Tribunal has recently looked at whether it is discriminatory to discipline an employee for failing to follow an instruction they mistakenly think will exacerbate their disability.
On the 6 May 2019, a 12 week consultation by the Government on proposed changes to Stamp Duty Land Tax (SDLT) rates for non-UK residents will come to an end.
The rush hour commute into Manchester City Centre ground to a halt one morning last month as a disgruntled subcontractor chose to block one of the key routes with plant hire vehicles. The protest was against of non-payment by Dawnus Construction, the main contractor appointed by Manchester City Council to carry of a £15 million road improvement scheme in Manchester and Salford.