Question For British Businessmen/accountants/lawyers

[LaoPo]

Since I'm not British, I'm not familiar with the EXACT results and meaning if an AIM noted company had to 'file for Administration'.

I understand that it is more or less going into bankruptcy but what exactly is the role of the -to be appointed- Aministrators and how far does their power go ?

Are the -major- shareholders now (completely) powerless ?

What is the difference between 'File for Administration' and: file for 'Chapter 11' like in the US, which enables companies to emerge from Chapter 11 after restructuring ?

Is it the same ?

LaoPo

[johnb]

Since I'm not British, I'm not familiar with the EXACT results and meaning if an AIM noted company had to 'file for Administration'.

I understand that it is more or less going into bankruptcy but what exactly is the role of the -to be appointed- Aministrators and how far does their power go ?

Are the -major- shareholders now (completely) powerless ?

What is the difference between 'File for Administration' and: file for 'Chapter 11' like in the US, which enables companies to emerge from Chapter 11 after restructuring ?

Is it the same ?

LaoPo

LaoPo

My understanding is that in the UK ' file for administration' the firm of accountants appointed by the Company are responsible to look after the creditors by either trying to sell the business or if this is not possible by selling the assets. Usually the accounts firm - goverment ( VAT & Tax) and employees ( redundancy) get their cut first whatever is left goes to the remaining creditors ' so much in the £ owed. Shareholders have no rights apart from statutary employments rights.

In the States Chapter 11 freezes the amount owed to creditors. This is a legal entity controlled by law and the Business has to put forward a plan as to how they can pay off the existing debt but are allowed to carry on trading:

Hope this helps

Johnb

[LaoPo]

Since I'm not British, I'm not familiar with the EXACT results and meaning if an AIM noted company had to 'file for Administration'.

I understand that it is more or less going into bankruptcy but what exactly is the role of the -to be appointed- Aministrators and how far does their power go ?

Are the -major- shareholders now (completely) powerless ?

What is the difference between 'File for Administration' and: file for 'Chapter 11' like in the US, which enables companies to emerge from Chapter 11 after restructuring ?

Is it the same ?

LaoPo

LaoPo

My understanding is that in the UK ' file for administration' the firm of accountants appointed by the Company are responsible to look after the creditors by either trying to sell the business or if this is not possible by selling the assets. Usually the accounts firm - goverment ( VAT & Tax) and employees ( redundancy) get their cut first whatever is left goes to the remaining creditors ' so much in the £ owed. Shareholders have no rights apart from statutary employments rights.

In the States Chapter 11 freezes the amount owed to creditors. This is a legal entity controlled by law and the Business has to put forward a plan as to how they can pay off the existing debt but are allowed to carry on trading:

Hope this helps

Johnb

Thank you.

However, it is not completely clear yet.

The company "filing for Administration" is in the process of appointing "Administrators". In this case it was an official statement because the company involved is listed on the so called 'Baby-Stock Market', the AIM in London.

The company is in serious cash flow problems and therefore (I assume) no longer able to continue operations.

So, in your words, the Administrators (possibly an Accountants Company ?) have full power to sell assets ? Does it mean that the company was ahead of possible creditors (who could have filed for a bankruptcy ?).

Hope to get a further answer.

LaoPo

[bendix]

I suspect it's lazy reporting LaoPo. I'm a bit hazy on this, but I don't think a company 'files for administration' - I think it is something imposed on the company by one or more of it's creditors.

At that state an administrator is appointed to run the company while things are sorted. The company will still attempt to trade. My understanding is that the administrator is charged with helping to trade the company out of debt if that's possible. If it turns out to be impossible, the administrator will liquidate the company. It's that liquidation that involves selling off the assets to liquidate them in an attempt to repay some or all of the creditors.

[LaoPo]

I suspect it's lazy reporting LaoPo. I'm a bit hazy on this, but I don't think a company 'files for administration' - I think it is something imposed on the company by one or more of it's creditors.

At that state an administrator is appointed to run the company while things are sorted. The company will still attempt to trade. My understanding is that the administrator is charged with helping to trade the company out of debt if that's possible. If it turns out to be impossible, the administrator will liquidate the company. It's that liquidation that involves selling off the assets to liquidate them in an attempt to repay some or all of the creditors.

Well, reading the message I don't think so. Said company asked AIM stock market themselves to suspend trading 2 months ago.

The official message (filed with the London Stock Market Officials) said this:

" Xxxxxx (Company) takes necessary steps to appoint administrators.

LONDON - Xxxxxx (Company) said it has taken the necessary steps to appoint administrators after carefully considering its financial position. Trading in the group's shares was suspended on XX date.

The company said its board had continued to explore options to address its short- and medium-term financing requirements.

It had been in negotiations with a number of parties and until very recently, and was hopeful funding would be received.

'It has now become clear that such funding will not be forthcoming and it is with regret that it is necessary for the Company to file for administration,' XXxxxx (company) said in a statement. "

Does this make any sense to you ?

I never heard of such a situation and that's why I asked.

LaoPo

[migrant]

I suspect it's lazy reporting LaoPo. I'm a bit hazy on this, but I don't think a company 'files for administration' - I think it is something imposed on the company by one or more of it's creditors.

At that state an administrator is appointed to run the company while things are sorted. The company will still attempt to trade. My understanding is that the administrator is charged with helping to trade the company out of debt if that's possible. If it turns out to be impossible, the administrator will liquidate the company. It's that liquidation that involves selling off the assets to liquidate them in an attempt to repay some or all of the creditors.

Well, reading the message I don't think so. Said company asked AIM stock market themselves to suspend trading 2 months ago.

The official message (filed with the London Stock Market Officials) said this:

" Xxxxxx (Company) takes necessary steps to appoint administrators.

LONDON - Xxxxxx (Company) said it has taken the necessary steps to appoint administrators after carefully considering its financial position. Trading in the group's shares was suspended on XX date.

The company said its board had continued to explore options to address its short- and medium-term financing requirements.

It had been in negotiations with a number of parties and until very recently, and was hopeful funding would be received.

'It has now become clear that such funding will not be forthcoming and it is with regret that it is necessary for the Company to file for administration,' XXxxxx (company) said in a statement. "

Does this make any sense to you ?

I never heard of such a situation and that's why I asked.

LaoPo

I'm from the States, but here there can be a couple ways for a company to basically declare bankruptcy

1) The company realizes tghat they can no longer meet their obligations so they voluntarily declare bankruptcy.

2) The company is not meeting it's obligations and the creditors force the company into bankruptcy.

This is very basic, but #1 sounds the equivelent of what you are asking.

Here most will declare bankruptcy when all is lost and ask the courts to approve a plan to either

1) Close the company and distribute all assets

2) Approve an operations plan where most the old debt is 'set aside' and the company operates under a plan so that they can 'get healthy' and eventually pay the old debt back.

[LaoPo]

I suspect it's lazy reporting LaoPo. I'm a bit hazy on this, but I don't think a company 'files for administration' - I think it is something imposed on the company by one or more of it's creditors.

At that state an administrator is appointed to run the company while things are sorted. The company will still attempt to trade. My understanding is that the administrator is charged with helping to trade the company out of debt if that's possible. If it turns out to be impossible, the administrator will liquidate the company. It's that liquidation that involves selling off the assets to liquidate them in an attempt to repay some or all of the creditors.

Well, reading the message I don't think so. Said company asked AIM stock market themselves to suspend trading 2 months ago.

The official message (filed with the London Stock Market Officials) said this:

" Xxxxxx (Company) takes necessary steps to appoint administrators.

LONDON - Xxxxxx (Company) said it has taken the necessary steps to appoint administrators after carefully considering its financial position. Trading in the group's shares was suspended on XX date.

The company said its board had continued to explore options to address its short- and medium-term financing requirements.

It had been in negotiations with a number of parties and until very recently, and was hopeful funding would be received.

'It has now become clear that such funding will not be forthcoming and it is with regret that it is necessary for the Company to file for administration,' XXxxxx (company) said in a statement. "

Does this make any sense to you ?

I never heard of such a situation and that's why I asked.

LaoPo

I'm from the States, but here there can be a couple ways for a company to basically declare bankruptcy

1) The company realizes tghat they can no longer meet their obligations so they voluntarily declare bankruptcy.

2) The company is not meeting it's obligations and the creditors force the company into bankruptcy.

This is very basic, but #1 sounds the equivelent of what you are asking.

Here most will declare bankruptcy when all is lost and ask the courts to approve a plan to either

1) Close the company and distribute all assets

2) Approve an operations plan where most the old debt is 'set aside' and the company operates under a plan so that they can 'get healthy' and eventually pay the old debt back.

I agree with what you say BUT the situation is still not clear because in your first:

1) the company declares bankruptcy; that is done directly with a court. You don't need to appoint Administrators but declare/ask for bankruptcy directly.

2) does not meet the original situation.

The odd thing is that the statement, filed by the company to the AIM Stock Market, says that THEY are in the process of appointing Administrators; that could mean that they are pulling the plug themselves. Is that a possibility ?

It could very well be that there are no (or very few/small) creditors/suppliers at all apart from private investors.

In your second number:

2) that's called a 'Surceance of Payments' more or less equivalent with the Chapter 11 in the US.

Maybe..just maybe...it could be the same as 'Filing for Administration'....am I correct ?

Hmmmm...

LaoPo

[LaoPo]

Let me re-post/rephrase my question:

" Xxxxxx (Company) takes necessary steps to appoint administrators.

LONDON - Xxxxxx (Company) said it has taken the necessary steps to appoint administrators after carefully considering its financial position. Trading in the group's shares was suspended on XX date.

The company said its board had continued to explore options to address its short- and medium-term financing requirements.

It had been in negotiations with a number of parties and until very recently, and was hopeful funding would be received.

'It has now become clear that such funding will not be forthcoming and it is with regret that it is necessary for the Company to file for administration,' XXxxxx (company) said in a statement. "

WHAT exactly does the above mean: "it is necessary for the Company to file for administration" ?

1. Are they filing voluntarily for a bankruptcy (I don't think so) ?

2. Are they filing/putting themselves in a "Surseance of Payments" -payments due- ? (like chapter 11 in the US)

I am still very confused and can't even find the proper answer on Google...

Anybody of you British specialists ?

LaoPo

Edited May 7, 2008 by LaoPo

[LaoPo]

I found my answer, coming from the AIM Authorities in London:

"The terminology used "appoint administrators" and "file for administration" refers to a court procedure. The administrator, is appointed to manage the company’s affairs, business and property for the benefit of the creditors. The person appointed must be an insolvency practitioner and has the status of an officer of the court."

IMO it is a kind of 'Surseance of Payments' (Chapter 11 if you wish) requested by the company and as I read it, it's the company itself that is able to appoint an Administrator themselves whilst in my own country it's a court that appoints an Administrator. -in most cases that is-

Question solved.

More information:

http://www.insolvency.gov.uk/

LaoPo