WHO MAY PETITION FOR AN ADMINISTRATION ORDER

An application by way of petition to the Court for an administration order can be made by the company or the directors, or by a creditor or creditors (including any contingent or prospective creditor or creditors), or by all or any of these parties.

The petitioner prepares an affidavit giving details of the company's financial position. This is usually supported by an independent report, again usually by an insolvency practitioner. This report is intended to show the court the company's financial position and the prospects of an administration achieving its objects. The opinion of the IP is likely to be of interest to the court It is possible for a creditor to petition for an order, but this is quite unusual.

THE HEARING OF THE PETITION

In considering the petition, the court has to decide whether or not there is a real prospect of the purpose, or purposes, for which the administration order is being made, can be achieved. If an administration order is made, it must specify the purpose or purposes for which it is made.

When the petition is presented to the court, any holder of a security who has the power to appoint an administrative receiver is given notice and therefore has the opportunity to do so. In practice steps are usually taken to liaise with the holders of floating charges to prevent wasting costs if they are determined to make an appointment. If an administrative receiver is in office when the petition is heard, the Court will only make an administration order if the person who appointed the administrative receiver consents thereto or there are sound reasons for challenging that appointment. If an order is made, the administrative receiver is then removed.

The purpose of the administration process is to impose a form of moratorium on the company's position to allow for the purposes of the order to be achieved. Effectively a stay of proceedings has effect as soon as the petition for an administration order is presented to the Court. It should be noted that the petition is not advertised and at this stage there will be little knowledge that it has been presented. There is, of course, no guarantee that an order will be made.

Between the presentation of a petition and the Court hearing:

• no resolution may be passed or order made for the winding up of the company

  and, without the leave of the court:

• no steps may be taken to enforced any security over the company's property
  
• goods supplied under retention of title cannot be repossessed
  
• no steps may be taken to repossess goods supplied under any hire purchase, agreement (or conditional sale or chattel leasing agreements)
  
• no other proceedings, execution or other legal process may be commenced or continued or distress levied against the company or its property.

Obviously the period of time between presentation of the petition and hearing by the court is kept as short as possible. If the petition is dismissed, the above restrictions are lifted and creditors are free to take whatever action they think fit. If an administration order is made, the effects are as follows:

• any winding up petition is dismissed
  
• no resolution may be passed or order made for the winding up of the company;
  
• no administrative receiver of the company may be appointed;
  
• any administrative receiver of the company shall vacate office;
  
• any receiver of part of the company's property) shall vacate office on being required to do so by the administrator
  and:
  
• no steps may be taken to enforced any security over the company's property
  
• goods supplied under retention of title cannot be repossessed
  
• no steps may be taken to repossess goods supplied under any hire purchase, agreement (or conditional sale or chattel leasing agreements)
  
• no other proceedings, execution or other legal process may be commenced or continued or distress levied against the company or its property.

without the consent of the administrator or the court.