Who pay for the cost of Administration?

[youngken]

An unimportant creditor (probably a friend of the boss of the company) hired an administrator to protect the company. The Administrator was biased and tried to do everything in favour of the company.
Finally there has no agreed proposal can be reached between the company and the major group of creditors, no company assets has been sold. The company is then going to liquidation process.
The major group of creditors have never paid for the administrator in the administration process. The administrator has asked for paying for the administration cost to all of the parties.
Will the cost of administration be settled in liquidation process?

 

[Gavin Bates]

Hi

the details provided sound a bit odd. It is very rare for a creditor to appoint an administrator as it would be very expensive to do so. It is more likely to have been a directors appointment.

it is not uncommon for the expenses of the administration to be a cost of the liquidation but ultimately the decision on fees is voted for by creditors so if you don’t like them you and other creditors can vote against them.

After that the administrator would have to go to court to get approval.

I hope this helps but if not anything more please let me know.

regards

Gavin

 

[youngken]

Thanks Gavin,
The truth was that creditor had appointed an administrator. Later the company director has paid for the administrator for a few months and then stop paying. The administrator asked the other creditors continued to pay for him but the other creditors refused.

 

[Gavin Bates]

Hi

I have to be honest and say that is very unusual. It would nice to know what the name of the Company in administration is so that I can look at the filed reports at Companies House.

As mentioned above the IP fees have to be voted upon by the creditors so you can object to them.

Kind regards

Gavin

 

[JeremySilva]

As Gavin says, if the Administrator's fees aren't agreed by the creditors the Administrator can go to court to get approval. If the court agrees the fees then yes, the fees will be paid out of the liquidation. If not, they won't.

Is the liquidator the same person as the administrator? If creditors don't like the IP they can call a meeting of creditors and appoint a different one. [The original Administrator/Liquidator would still be entitled to be paid, assuming he can get creditors or the court to agree the fees.]

 

[Lisa Thomas]

This does all sound a bit odd.

One thing to point out is that the Administrator acts on behalf of the Company so where you have stated he was bias does not make sense.

Also, a Company will normally only move from an Administration into a Liquidation in order to be able to pay a dividend to unsecured creditors.

 

[youngken]

A certain amount of cash belongs to the Company was recorded in the Statement of Affair. Can the Administrator take it for his expense during the administration process? Repeat again, the administrator was appointed by a creditor, not the company boss!

 

[Lisa Thomas]

Yes the Company's assets pay the Administrators costs.

 

[youngken]

As Gavin says, if the Administrator's fees aren't agreed by the creditors the Administrator can go to court to get approval. If the court agrees the fees then yes, the fees will be paid out of the liquidation. If not, they won't.

Is the liquidator the same person as the administrator? If creditors don't like the IP they can call a meeting of creditors and appoint a different one. [The original Administrator/Liquidator would still be entitled to be paid, assuming he can get creditors or the court to agree the fees.]

So there is a possibility of the Administrator losing his money for a case if the court rule out his fee, same as any other business!

 

[JeremySilva]

In an insolvency the assets of the company effectively belong to the creditors. The Administrator is asking to be paid for work done on the company for the creditors so the creditors have to approve the fees. If the creditors don't approve them the Administrator can ask the court. If the court doesn't approve them they won't be paid.

The court might approve the fees in full or they might approve a reduced fee. I'd say it's rare for the court to say the Administrator is not entitled to anything at all.

None of the above stops the Administrator being paid by a third party though but I think any such payment would need to be disclosed to creditors.

 

[youngken]

I have heard that our administrator was going to apply Para 71 to sell the asset.
If the administrator have filed a court case to sell the asset (a failed property development), should he require to inform the relevant creditors (UN1 holders)? If not, can the creditor find out the court case from gazette etc before litigation started?

 

[Lisa Thomas]

I haven't had to make such an application but presume the secured creditor/s would have to be given the opportunity to oppose to the application and would therefore be entitled to notice.

Before it got to that stage however I would expect the Administrator to have entered into discussions with the secured creditor about their proposals/request for the asset to be sold with the secured creditors consent) to save applying to court.

 

[youngken]

Our group need to hire a legal representative for court hearing. We prefer to hire an insolvency law firm which accept minimal basic with high success rate commission. Is this model common in UK?

 

[Lisa Thomas]

If you DM me, I can recommend an insolvency solicitor to you, who can confirm their charging basis.