External Administration of Companies Chapter 6 External Administration of Companies

6.1 Voluntary Administration An administrator who is an independent person who is a registered liquidator is appointed to the company (usually by the company’s directors) and takes full control of the company to try to work out a way to save the company.

Voluntary Administration EXAMPLE A recent, very public voluntary administration was the 85 year old Australian confectionary business of Darrel Lea, which took place between July and September 2012. Eventually, the voluntary administration process enabled at least a part of the company business to be sold and to continue, although with significant job losses. The media articles on p 219 report the announcement of the voluntary administration and the announcement of the sale of the remaining company business.

Appointment of Administrators The directors may appoint an administrator under s436A(1) by resolving that: the company is insolvent or likely to become insolvent; and an administrator should be appointed.

Conduct of the Administration When does the administration start? What is the administrator’s job? What powers may he or she exercise?

6.2 Receivership A company is placed into receivership when an independent and qualified person, known as a receiver, is appointed by a secured creditor of the company or by the court to take control of some or all of the company’s assets.

Appointment of the Receiver A receiver may be appointed by: The court. A secured creditor where the security instrument gives the creditor the power to appoint a receiver and they wish to enforce this charge.

Powers and Duties of Receivers and Managers The receiver’s power is derived from: The instrument of the security interest or the court order under which appointment has occurred. S420 gives the receiver wide powers to do all things necessary or convenient to achieve the objectives of receivership. It can be modified by the instrument of charge or court order.

Liability of Receivers Under s419 a receiver is personally liable for any goods or services ordered during the receivership – essentially the same as those for which administrators are liable in a voluntary administration.

6.3 Winding Up or Liquidation AIM: to end a company’s affairs and pay its debts An independent registered liquidator is appointed to take control of the company so its affairs can be wound up in a fair and orderly manner.

Types of Winding Up or Liquidation Members voluntary winding up 2.Creditors voluntary winding up 3.Compulsory winding up in insolvency 4.Compulsory winding up on other grounds.

Powers of Liquidators Two of the most important powers relate to: the recovery of certain transactions entered into by the company shortly before the company went into liquidation, known as voidable transactions and bringing proceedings against the directors of the company for “insolvent trading” – that is allowing the company to continue to trade and incur debts while the company is insolvent.

Insolvency and Consumer Rights It is not only creditors such as banks or suppliers who may be affected by the insolvency of a company. Consumers may also be affected.