Notice of Intention to Appoint an Administrator: What Is It?
One way of stopping creditor legal action – and getting some time back to settle company debts – involves filing a notice of intention to appoint an administrator.
This is a formal document filed by a company or its directors, which signifies the business owners’ intent to enter administration.
Filing this notice is a crucial moment, enabling the business to secure some breathing space from creditors to explore recovery options.
In the UK, the legal foundation for giving notice of intention to appoint an administrator lies in the Insolvency Act 1986. During administration, licensed insolvency practitioners aim to help the business recover.
Giving notice of intention to appoint an administrator
When a business is under financial pressure, with creditor demands growing, stress and worry are common reactions.
Filing a notice of intention to appoint an administrator gives company directors a chance to pause, regroup, and consider potential business recovery options.
During this interim period, known as a “moratorium”, the company gains some protection from creditors.
With the moratorium in place, creditors cannot take further action to reclaim funds – such as issuing a winding-up petition or attempting to seize assets, for example.
This breathing room is often critical in determining whether someone can rescue the business, or explore other options to handle its financial challenges.
Filing a notice of intention is common among directors who wish to retain control over the insolvency process.
- By choosing administration, directors avoid the more severe consequences of company liquidation, which can include the total shutdown of operations.
- Indeed, in many cases, administration allows the business to continue functioning under the supervision of appointed administrators.
The administrators work in the best interest of creditors, employees and other stakeholders.
The legal framework around the notice of intention
The Insolvency Act 1986 legislation sets out the specific guidelines and requirements that must be followed to initiate the administration process.
- For example, a company’s directors can file the notice of intention, but it is essential to meet all regulatory requirements to ensure the notice is valid and the process runs smoothly.
- Once the notice is filed, the 10-day moratorium period commences. For these 10 days, the company’s assets are safeguarded, and creditors are prevented from pursuing enforcement actions.
- It’ll be during these 10 days that insolvency professionals will work with a business to identify a viable path to business solvency.
Company directions generally will issue a notice of intention to appoint an administrator.
Secured creditors – for example, a bank holding a floating charge – may also do so to ensure they have a say in how the insolvency process unfolds. For more details, read about the differences between floating and fixed charges.
The company must also notify qualifying floating charge holders and if applicable, the person managing a company voluntary arrangement (CVA) if one is already in place. This needs to happen at least five days before filing the notice of intention to appoint an administrator.
The role of an administrator
Once the company directors or a creditor have filed the notice of intention, an insolvency practitioner takes over as the administrator.
Their principal duty is to act in the best interests of the creditors, taking control of the company’s assets to achieve the best possible outcome for the business and all involved.
The ultimate goal of administration is to rescue the company as a going concern whenever possible. This maximises returns for creditors, or at the very least, achieves a better result for them compared to if the company enters liquidation outright.
As such, the administrator has significant authority. They are able to restructure the business, sell off certain assets, and, if necessary, wind down parts of the company.
For more information about what happens when a company goes into administration, take a look at our blog.
Final thoughts: Notice of intention to appoint an administrator
We hope you found this article useful. For others, browse through our blog – recently we provided an account freezing order guide for company directors and explained how the retention of title clause works.
Hudson Weir offers a wide range of support for companies in trouble, including supporting them through administration.
The experienced insolvency practitioners at Hudson Weir understand the legal, financial, and operational intricacies of guiding businesses through the administration process. We provide tailored support to ensure businesses make informed decisions every step of the way.
We understand it isn’t a decision to make lightly, especially if considering what happens to staff when a company goes into administration, but Hudson Weir is here to help.
For more information about the notice of intention to appoint an administrator or to discuss any business challenges – please contact us for a free, no-obligation, conversation today.
