Company in Administration - Dodgy Practice?
Discussion
I am dealing with a company that has gone in to administration. Since the court order for administration being granted, specific staff members from the company itself have been contacting me directly, and fairly relentlessly, to try and settle a commercial matter that has been rumbling on. I spoke to the administrator who was not even aware of my clients business/interest.
This all seems pretty dodgy to me. I thought once administrators are appointed, they take full control and are entirely responsible for the companies affairs. Is it beyond imagination to think that the remaining directors have not told the administrators of certain accounts in an effort to try and sneak in whatever money in by the back door?
This all seems pretty dodgy to me. I thought once administrators are appointed, they take full control and are entirely responsible for the companies affairs. Is it beyond imagination to think that the remaining directors have not told the administrators of certain accounts in an effort to try and sneak in whatever money in by the back door?
WinkleHoff said:
I am dealing with a company that has gone in to administration. Since the court order for administration being granted, specific staff members from the company itself have been contacting me directly, and fairly relentlessly, to try and settle a commercial matter that has been rumbling on. I spoke to the administrator who was not even aware of my clients business/interest.
This all seems pretty dodgy to me. I thought once administrators are appointed, they take full control and are entirely responsible for the companies affairs. Is it beyond imagination to think that the remaining directors have not told the administrators of certain accounts in an effort to try and sneak in whatever money in by the back door?
It's dodgy if they tell you they've changed bank accounts and ask that the money you owe them is paid into the new accountThis all seems pretty dodgy to me. I thought once administrators are appointed, they take full control and are entirely responsible for the companies affairs. Is it beyond imagination to think that the remaining directors have not told the administrators of certain accounts in an effort to try and sneak in whatever money in by the back door?
Alpinestars said:
The Administrators do take over the affairs of the company. But often retain staff to settle commercial matters.
No doubt this happens. But my reading of the insolvency act is that the administrator takes over all management function so, whilst I would expect retained staff to be feeding in to them, they should not be doing anything in isolation. Also I note that the insolvency act requires the directors to make a full and frank statement of affairs to the administrator, so it's quite odd/improper that they would leave my client off of this I would have thought. Found this on the practical law website;
"When a company goes into administration, the directors' powers are curtailed. A director cannot exercise any management power that could interfere with the exercise of the administrator's powers without prior consent from the administrator (paragraph 64, Schedule B1, IA 1986). If the company ultimately comes out of administration and resumes trading, the directors regain their full powers.
Any officer of the company (or other person defined in paragraph 47(3) of Schedule B1) may be required to provide a statement of affairs, including details of the company's assets, liabilities and creditors (paragraph 47(1), Schedule B1). It is an offence not to comply with this requirement."
So, if the administrator was not aware of my client, who is potentially a creditor, then they have surely not complied with the last part. As for the first part, their interactions I believe are contrary to this. Hmm.....
"When a company goes into administration, the directors' powers are curtailed. A director cannot exercise any management power that could interfere with the exercise of the administrator's powers without prior consent from the administrator (paragraph 64, Schedule B1, IA 1986). If the company ultimately comes out of administration and resumes trading, the directors regain their full powers.
Any officer of the company (or other person defined in paragraph 47(3) of Schedule B1) may be required to provide a statement of affairs, including details of the company's assets, liabilities and creditors (paragraph 47(1), Schedule B1). It is an offence not to comply with this requirement."
So, if the administrator was not aware of my client, who is potentially a creditor, then they have surely not complied with the last part. As for the first part, their interactions I believe are contrary to this. Hmm.....
WinkleHoff said:
Alpinestars said:
The Administrators do take over the affairs of the company. But often retain staff to settle commercial matters.
No doubt this happens. But my reading of the insolvency act is that the administrator takes over all management function so, whilst I would expect retained staff to be feeding in to them, they should not be doing anything in isolation. Also I note that the insolvency act requires the directors to make a full and frank statement of affairs to the administrator, so it's quite odd/improper that they would leave my client off of this I would have thought. janesmith1950 said:
Once insolvent, the directors' duties are to the creditors. Would have thought it perfectly reasonable and responsible for the directors and retained staff to be doing their best to bring in outstanding debts on the creditors' behalves.
No. The Administrator has the duty, and is in charge. Alpinestars said:
No. The Administrator has the duty, and is in charge.
I wasn't talking about who has control of the company, I was talking about directors' duties. They are to the company when solvent and to the creditors when insolvent. Hence why they may be putting their efforts into chasing debtors on behalf of the creditors.janesmith1950 said:
Alpinestars said:
No. The Administrator has the duty, and is in charge.
I wasn't talking about who has control of the company, I was talking about directors' duties. They are to the company when solvent and to the creditors when insolvent. Hence why they may be putting their efforts into chasing debtors on behalf of the creditors.Alpinestars said:
The Administrators are in charge. And they are the ones who have a duty to creditors. Not the directors.
Without wanting to derail the thread, you are conflating several points. Seen through the eyes of the director, before insolvency you owe your duty to the company. In insolvency you owe your duty to the creditors. On the appointment of an administrator, you are not removed from office and although you are no longer in control of the company, you are not relieved of your statutory or common law fiduciary duties.Through the eyes of the company, in administration the directors are no longer running it (the administrator is), however the directors must continue to act in the interests of the creditors.
In this thread's scenario, it's perfectly possible and reasonable that the directors and/or management assist the administrator in recovering outstanding debts to the company, for the benefit of the creditors.
I wouldn't be surprised if we've gone off on a tangent and are furiously agreeing with one another.
janesmith1950 said:
Without wanting to derail the thread, you are conflating several points. Seen through the eyes of the director, before insolvency you owe your duty to the company. In insolvency you owe your duty to the creditors. On the appointment of an administrator, you are not removed from office and although you are no longer in control of the company, you are not relieved of your statutory or common law fiduciary duties.
Through the eyes of the company, in administration the directors are no longer running it (the administrator is), however the directors must continue to act in the interests of the creditors.
In this thread's scenario, it's perfectly possible and reasonable that the directors and/or management assist the administrator in recovering outstanding debts to the company, for the benefit of the creditors.
I wouldn't be surprised if we've gone off on a tangent and are furiously agreeing with one another.
I work with Administrator’s for a living. What do you do?Through the eyes of the company, in administration the directors are no longer running it (the administrator is), however the directors must continue to act in the interests of the creditors.
In this thread's scenario, it's perfectly possible and reasonable that the directors and/or management assist the administrator in recovering outstanding debts to the company, for the benefit of the creditors.
I wouldn't be surprised if we've gone off on a tangent and are furiously agreeing with one another.
Can I suggest you read the Enterprise Act and Insolvency Act.
This is a guide:
https://www.companydebt.com/guides/rescue-guides/a...
What Happens to Company Directors?
As already described, during the process of administration, the directors’ ability to control the company comes to an end. They still have a duty to cooperate and assist with the administration, but they cannot make decisions relating to the management of the company without the say-so of the administrator.
In some cases, to improve the outcome of the administration, the directors are given some decision making powers. However, this is completely at the discretion of the administrator.
Edit to add: You might be confusing an insolvency process, eg an insolvent Administration, with a company being insolvent (without the appointment of an Administrator, or liquidator). In those circumstances the directors’ focus has to be on creditors, not least to protect themselves from personal liability. When a company enters Adminstration, they relinquish their responsibilities vis a vis creditors and shareholders.
Edited by Alpinestars on Saturday 23 March 18:20
Um, I am not arguing against any of your points.
You are saying in administration a director no longer controls the company. I am agreeing with you.
I am saying, additionally, that an administration does not mean the directors are automatically removed from office and that, as long they remain so, their fiduciary duties remain in-tact.
I then say, as I am sure you would agree, that directors may be retained to assist the administrator and even retain some powers as the administrator sees fit (for example, chasing debtors).
Seeming you work in insolvency, you will know all of this!
You are saying in administration a director no longer controls the company. I am agreeing with you.
I am saying, additionally, that an administration does not mean the directors are automatically removed from office and that, as long they remain so, their fiduciary duties remain in-tact.
I then say, as I am sure you would agree, that directors may be retained to assist the administrator and even retain some powers as the administrator sees fit (for example, chasing debtors).
Seeming you work in insolvency, you will know all of this!
WinkleHoff said:
I am dealing with a company that has gone in to administration. Since the court order for administration being granted, specific staff members from the company itself have been contacting me directly, and fairly relentlessly, to try and settle a commercial matter that has been rumbling on. I spoke to the administrator who was not even aware of my clients business/interest.
This all seems pretty dodgy to me. I thought once administrators are appointed, they take full control and are entirely responsible for the companies affairs. Is it beyond imagination to think that the remaining directors have not told the administrators of certain accounts in an effort to try and sneak in whatever money in by the back door?
Who appointed the Administrators? The Bank, or a Creditor? Either way, if the Directors are redirecting receipts due to the business in Administration, that sounds a bit "fraudy".This all seems pretty dodgy to me. I thought once administrators are appointed, they take full control and are entirely responsible for the companies affairs. Is it beyond imagination to think that the remaining directors have not told the administrators of certain accounts in an effort to try and sneak in whatever money in by the back door?
It sounds as though the Administrators aren't aware of the level of the Company's liabilities, which implies that the accounts department, either deliberately or otherwise, are not up to scratch, and the accounts are incomplete. And if there are other Bank accounts, the Administrators need to be aware of these. If the Directors have given Guarantees, these will show up on a Companies House search, and identify which Banks are involved.
There are too many unanswered questions, but any Administrator worth his salt should be able to find enough answers to complete the picture.
janesmith1950 said:
Um, I am not arguing against any of your points.
You are saying in administration a director no longer controls the company. I am agreeing with you.
I am saying, additionally, that an administration does not mean the directors are automatically removed from office and that, as long they remain so, their fiduciary duties remain in-tact.
I then say, as I am sure you would agree, that directors may be retained to assist the administrator and even retain some powers as the administrator sees fit (for example, chasing debtors).
Seeming you work in insolvency, you will know all of this!
I stated in my first post that the Administrator can, and often does, retain employees and former officers of a company. You are saying in administration a director no longer controls the company. I am agreeing with you.
I am saying, additionally, that an administration does not mean the directors are automatically removed from office and that, as long they remain so, their fiduciary duties remain in-tact.
I then say, as I am sure you would agree, that directors may be retained to assist the administrator and even retain some powers as the administrator sees fit (for example, chasing debtors).
Seeming you work in insolvency, you will know all of this!
Directors have no (real) powers in Administration - unless they are given them by the Administrator. You’re still not right.
All, some interesting replies here.
In my particular scenario I believe that;
1: The administrator should be undertaking all communication with me/my client, and not officers of the company without the approval of the administrator.
2: One of you chaps felt that the full extent of the companies liabilities may not be disclosed through poor accounting or by some level of concealment. This I think is backed up by the administrators having no knowledge of my clients contract/account.
3: In all correspondence received since appointment of administrators, none of the companies officers has made any reference at all to the insolvency of the business, they are writing as if nothing has happened.
In my particular scenario I believe that;
1: The administrator should be undertaking all communication with me/my client, and not officers of the company without the approval of the administrator.
2: One of you chaps felt that the full extent of the companies liabilities may not be disclosed through poor accounting or by some level of concealment. This I think is backed up by the administrators having no knowledge of my clients contract/account.
3: In all correspondence received since appointment of administrators, none of the companies officers has made any reference at all to the insolvency of the business, they are writing as if nothing has happened.
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