Administration To Compulsory Liquidation

The amended process implemented by the Enterprise Act 2002 introducing schedule B1 to the Insolvency Act 1986 sets out in paragraphs 76 to 86 the process for ending the administration. Under the previous regime, it was always necessary to seek Court release at the end of the administration period but the new streamlined process provides various exit routes for administrators to consider. There is however a common scenario which does not fit in with any of the prescribed exits.

Specifically, this involves the administration period coming to an end but where the principles at paragraph 83(1) do not apply. Paragraph 83 relates to the move from administration to creditors voluntary liquidation in circumstances where secured creditors have been paid or secured in full and where it is likely that a distribution will be made to unsecured creditors. There is an increasing number of situations where the administration period falls to clear in its entirety the secured creditor claims but further investigations, enquiries or claims need to be brought by a liquidator to make further returns to initially secured creditors but also unsecured creditors as well.

If the situation does not fit neatly into paragraph 83, it has become common practice for an application made to Court to seek a compulsory order to enable the company's administration to flow into a liquidation seamlessly. In such circumstances an application needs to be made to the Court under paragraph 79 and specifically 79(3)(b) which states that the administrator should make an application under that paragraph if he or she thinks that the purpose of the administration has been sufficiently achieved in relation to the company. The application should include a request that the order be discharged and that the joint administrators be given their full release under paragraph 98(2)(c) of schedule B1 and that the company be placed into liquidation with the joint administrators appointed joint liquidators if appropriate. Given the lack of clear guidance in the...