No doubt those of you in business will already be aware to some extent of the insolvency process of administration. It’s hard to miss it, with many high-profile businesses in the headlines for going into administration, such as Wilko, Le Pain Quotidien and Hunter to name a few.
Administration is intended to be a rescue process as much as an insolvency process. One major benefit of putting a company into administration is to take advantage of the moratorium on claims made against the company during the period of administration. This can give a company the breathing space it needs to turn itself around, with the intention to come out of administration when it is able to pay its debts again.
Alternatively, administration provides a good platform for sale of the viable parts of a business while the business is still trading as a going concern, with customers, suppliers and staff all still in place.
In this guide, senior Insolvency Solicitor Eleanor Stephens explains what types of companies have to use the special administration process and how it differs from a standard company administration.
Contents:
What is Special Administration?
For companies that carry out a wider public interest function, such as energy companies, or financial institutions, there are a series of specific and bespoke administration regimes available to them if it is necessary for them to enter administration. These fulfil an additional function to a typical private company administration, depending on the type of business involved.
If a company is put into special administration, then the administrator will have specific objectives, that may differ and be additional to a standard private company administration.
Administrations are not intended to be a long-term solution, and administrators must move forward with their objectives as soon as they can to resolve the position of the company and protect stakeholders such as consumers or students or tenants etc, depending on the industry.
What types of company have to use the special administration process?
There are a number of bespoke special administration regimes already in place. These are for specific industries and companies that operation within them, such as:
- The travel industry - air traffic licensee companies
- The charitable sector – any incorporated charitable institutions
- Energy supply companies – including gas transportation and electricity transmission and distribution companies as well as licensee nuclear companies and smart meter communication licensees
- Water supply companies - water undertakers, sewerage undertakers or companies that are qualifying licensed water suppliers
- Education institutions – further education and sixth form colleges
- Financial institutions – including investment banks, co-operative societies, community benefit societies and credit unions, E-money and payment institutions, banks, building societies and companies providing services under a public-private partnership agreement
- Health Services – including the NHS
- Protected railway services
- Postal services
- Providers of social housing
These special administration regimes are expanding as new industries become more prevalent, and it is anticipated that additional bespoke regimes will apply to airlines, insurers and cryptocurrency providers in due course.
How does special administration differ from standard company administration?
Each regime has bespoke needs, depending on the specific needs of the industry, with a view to protecting those most affected by the administration, in particular the consumers.
Standard company administrations have a number of objectives they must work towards, which in priority order is to either:
- rescue the company as a going concern; or
- ensure a better outcome for creditors as a whole than would be likely if the company were wound up; or
- a realisation of the company’s assets to make a distribution to one or more secured or preferential creditors.
Depending on the special regime in place, the primary objectives may differ.
It may also be the case that the government will provide financial support to ensure that consumers are not adversely affected by the administration, while allowing time for the business to move elsewhere, ensuring uninterrupted service.
For example, in the special administration of an energy supply company, the primary objective will be to ensure that energy supplies are continued at the lowest reasonable costs, and then move to either rescue the energy supply company as a going concern and/or ensure the transfer as a going concern of the whole or parts of the business to another supplier.
A good recent example of this is the special administration of Bulb Energy.
Another example is the special administration regime of a higher education institution. Here, the Secretary of State may apply to appoint an education administrator to manage the higher education providers’ business and property with a view to minimising or avoiding disruption to existing students.
Each particular special administration will give certain powers to administrators to enable them to achieve their objectives.
Summary
At Harper James we have many years’ experience of the administration regimes, both in implementing administration on behalf of a company or creditors, or liaising with administrators on behalf of our clients to obtain the best outcome for them as creditors.
If this is relevant to you, don’t hesitate to contact one of our dedicated insolvency solicitors for more information.
