What-is-a-Notice-of-Intention-to-Appoint-Administrators-Birmingham

What is a Notice of Intention in Administration?

A Notice of Intention is employed to notify specific parties that a company plans to enter administration. Usually submitted to court by directors aiming to avert their company’s liquidation.

This notice halts the creditor’s legal action, providing a brief period to decide the best course for the business. The outcome of filing this notice can differ; at times, debt restructuring proves the most effective solution, while in other cases, it might entail selling business assets through a process known as pre-pack administration.

 

Filing a notice of intention in administration

The company, its directors, or a qualifying floating charge holder (usually the bank) can all submit a notice of intention to the court. Following this, an administrator of their choice will be appointed.

The floating charge holder can object if they disagree with the chosen administrator. Although rare, they can appoint their own in such situations.

Are there situations where a court might not approve a notice of intention? 

Yes, if the company entered administration in the last 12 months or a winding-up petition has already been filed against them, the court is unlikely to accept a notice of intention.

 

The procedure for filing a notice of intention

The company must inform qualifying floating charge holders and supervisors of any existing company voluntary arrangements, at least five business days before filing the notice in court.

This allows the qualifying charge holder the opportunity to object to the choice of the administrator if necessary, although, as mentioned earlier, this seldom occurs in practice.

The notice of intention requires the completion of the administrators’ names and addresses, along with other details about the company and its situation.

Recent case law, such as Davis Haulage Limited vs JCAM Commercial Real Estate Property XV Ltd, directly impacts the Notice of Intention and a company’s ability to issue one

Essentially, a notice of intention may only be filed in court if there is a qualifying floating chargeholder—a floating charge created on or after 15 September 2003. In the absence of a qualifying floating charge holder, a notice of intention may not be used.

 

What happens after filing a notice of intention?

After filing the notice of intention in court, an interim moratorium period of 10 business days is activated. This allows the directors and administrator to strategise for addressing the company’s financial decline and, ultimately, avoiding liquidation.

During this moratorium, the company’s creditors cannot initiate or continue legal action against the company without court authorisation, which is unlikely in practice.

 

If the initial 10-day moratorium concludes without a finalised plan—perhaps negotiations for the business sale are ongoing—a further moratorium period of 10 days may be sought.

However, the court requires convincing evidence that a deal is in progress and likely to yield a defined outcome for the company. Any attempt to misuse the court process by submitting multiple applications through various notices of intention will be viewed unfavourably.

 

Why should a company file a notice of intention?

Administration is often the optimal solution for eligible companies facing significant cash flow challenges but possessing a viable business at its core. It is a formal insolvency procedure commonly employed for restructuring, potentially leading to a Company Voluntary Arrangement or a process called pre-pack administration.

In pre-pack administration, a company’s assets are swiftly sold, often to the existing directors who use their own funds for the purchase. The buyers then establish a ‘newco’ and continue trading without the burden of debt.

However, this process is susceptible to abuse, and a licensed insolvency practitioner is legally obligated to demonstrate that a pre-pack administration provides creditors with a superior return compared to liquidation.

 

While business assets are swiftly sold in this arrangement if the insolvency practitioner can prove that a fair value was achieved, avoiding a purchase below market value and that the procedure aimed to benefit creditors, pre-pack administration can be the optimal choice post filing the notice of intention.

Vanguard Insolvency specialises in insolvency and can provide the professional assistance required if your company is facing a serious decline. We will explain more about the notice of intention about your specific situation and ensure you comprehend the implications of all available options. To schedule a free same-day consultation, please contact one of our team members or use our call-back feature on our website.

 

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Senior Partner at Vanguard Insolvency Practitioners | Website | + posts

I am an insolvency professional with a distinguished career specialising in commercial insolvency, adeptly navigating Creditors Voluntary Liquidation, Company Voluntary Arrangements, and Company Administrations. With a comprehensive understanding of insolvency laws and an unwavering commitment to ethical practices.