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Which TWO of the following statements describe the effect of an administration order?
A. Past transactions of the company may not be challenged
B. No creditor can appoint a receiver
C. The administrator acts as agent for the company as a whole, including the creditors
D. The administrator can sell assets which are subject to a fixed or floating charge to raise money for the companyI chose B and D but the model answer suggests B and C.
For C, isn’t the adminstrator the agent of the company only? While the administrator needs to treat creditors fairly and in their best interest but is not legally their agent.
For D, the administrator can generally do so after obtaining court permission or chargeholders’ consent.Please help me clarifying this,
Thank you.We are agreed on A and D! So it’s just B and C that we neem to consider.
A creditor may appoint, but only with the sanction of the court.
For option C the administrator is the agent of the company but they also have legal responsibilities to the creditors (FYI they are also an officer of the Court!)
Do you want chapter and verse references?
OK
Which of the following may be arranged under “pre-pack” administration?
(1) Potential buyers for the sale of the company
(2) A sale price for the business
A.1 only
B.2 only
C.Neither 1 nor 2
D.Both 1 and 2Hi Mike
For this question I answered D but the mark scheme suggests A and explains that A pre-packaged administration (“pre-pack”) sale is a pre-arranged sale of a business and its assets (not the company) on the commencement of administration.
Can you please explain what is the difference between selling a business and its assets VS selling a company?
You know (from your studies) that a company is a separate person in law. It exists, just as you and I exist. If I sell everything that I own (or give it away or lose it) then I shall have no assets left. But I shall still exist.
Same with a company! In a pre-pack, the assets, the bank of customers, its business, its goodwill are disposed of by the administrator. But the company still exists … and will continue to exist until the process of liquidation officially kills the company.
Better?
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