the floating charge holder's

Administration cases
See also: Administration in United Kingdom law, Administration (law), and Enterprise Act 2002

After the Cork Report in 1982, a major new objective for UK insolvency law became creating a "rescue culture" for business, as well as ensuring transparency, accountability and collectivity.[91] The hallmark of the rescue culture is the administration procedure in the Insolvency Act 1986, Schedule B1 as updated by the Enterprise Act 2002. Under Schedule B1, paragraph 3 sets the primary objective of the administrator as "rescuing the company as a going concern", or if not usually selling the business, and if this is not possible realising the property to distribute to creditors. Once an administrator is appointed, she will replace the directors.[92] Under paragraph 40 all creditors are precluded by a statutory moratorium from bringing enforcement procedures to recover their debts. This even includes a bar on secured creditors taking and or selling assets subject to security, unless they get the court's permission.[93] The moratorium is fundamental to keeping the business' assets in tact and giving the company a "breathing space" for the purpose of a restructure. It also extends to a moratorium on the enforcement of criminal proceedings. So in Environmental Agency v Clark[94] the Court of Appeal held that the Environment Agency needed court approval to bring a prosecution against a polluting company, though in the circumstances leave was granted. Guidance for when leave should be given by the court was elaborated in Re Atlantic Computer Systems plc (No 1).[95] In this case, the company in administration had sublet computers that were owned by a set of banks who wanted to repossess them. Nicholls LJ held leave to collect assets should be given if it would not impede the administration's purpose, but strong weight should be given to the interests of the holder of property rights. Here, the banks were given permission because the costs to the banks were disproportionate to the benefit to the company.[96] The moratorium lasts for one year, but can be extended with the administration.[97]

The duties of an administrator in Schedule B1, paragraph 3 are theoretically meant to be exercised for the benefit of the creditors as a whole.[98] However the administrator's duties on paper lie in tension with how, and by who, an administrator is appointed. The holder of a floating charge, which covers substantially all of a company's property (typically the company's bank), has an absolute right to determine who the administrator. Under Schedule B1, paragraph 14, it may appoint the administrator directly, and can do so out of court. The company need not be technically insolvent, so long as the terms of the floating charge allow appointment. The directors or the company may also appoint an administrator out of court,[99] but must give five days' notice to any floating charge holder,[100] who may at any point intervene and install his own preferred candidate.[101] The court can, in law, refuse the floating charge holder's choice of administrator because of the 'particular circumstances of the case', though this will be rare. Typically banks wish to avoid the spotlight and any effect on their reputation, and so they suggest that company directors appoint the administrator from their own list.[102] Other creditors may also apply to court for an administrator to be appointed, although once again, the floating charge holder may intervene.[103] In this case, the court will grant the petition for appointment of an administrator only if, first, the company "is or is likely to become unable to pay its debts" (identical to IA 1986 section 123) and "the administration order is reasonably likely to achieve the purpose of administration."[104] In Re Harris Simons Construction Ltd Hoffmann J held that 'likely to achieve the purpose of administration' meant a test lower than balance of probabilities, and more like whether there was a 'real prospect' of success or a 'good arguable case' for it. So here the company was granted an administration order, which led to its major creditor granting funding to continue four building contracts.[105]