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HMRC internal manual

Debt Management and Banking Manual

Ordinary cause: Company Administration Orders

The Enterprise Act 2002 modified company administration orders (CAOs). The procedure is extremely flexible and convenient to use and administrators will have a wide range of powers.

It is anticipated that the administration will last up to 12 months or 18 months by agreement with creditors or, exceptionally, longer by application to the court.

The expectancy is that the exit route from administration will be determined within three months so that the duration of these administrations will be much shorter than traditional insolvencies.

There are three principal exit routes:

  • company voluntary arrangements
  • liquidation
  • company dissolution with or without a distribution.

There is concern that because of the inbuilt flexibility administration may be abused where phoenixism is involved or Section 98 creditors meetings are held. Thus as this new procedure becomes established it may well be that administrations will eventually outnumber liquidations.

Also, there is scope for creditors (including HMRC) to seek the appointment of an administrator in place of the traditional company winding up petitions.

Enforcement and Insolvency Services Edinburgh is responsible for the setting up and lodging of claims (the processing side) for company administration cases and also for the technical aspects where HMRC debts are concerned.

Debt management office – preliminary procedures

Once a notice of intention to appoint an administrator is filed at court, it effectively prohibits instituting or continuing any legal process either against a company or against the property of a company.

Where you become aware that such an application has been made it will be necessary to halt any proceedings started but you should not at this stage withdraw the case. If subsequently an administrator is not appointed you should continue the action.

Action to take where administrator appointed

Once you have been informed that an administrator has been appointed you must not start any new proceedings against the company.

If you have already commenced proceedings when you are notified that an administrator has been appointed you must:

  • advise the court in writing to suspend any action for the case citing the requirements of Paragraph 43(6) to Schedule 16 of the Enterprise Act 2002 as the reason for doing so then
  • take action as in INS2.107.