Before a company can make an application for an Administration Order it must fulfill certain conditions. These include:
The company must be insolvent but this condition can be achieved in a number of ways.
A company is insolvent either if it cannot pay its debts as and when they fall due or if its liabilities are greater than its assets. In most cases it will be relatively straightforward to demonstrate insolvency.
Achievement of Purpose.
An order will only be made if it will achieve one or more of the objectives set out in the Insolvency Act 1986. These include:
The survival of the company
The approval by creditors of a Corporate Voluntary Arrangement
A better realisation of the company's assets than would otherwise be the case
Some other arrangement with creditors
The procedure for obtaining an administration order is now more straightforward following the Enterprise Act 2002. The old procedure whereby a formal application had to be made to the Court followed by a hearing is still available. This was felt however to be too costly for many companies and accordingly a newer, slim lined process was introduced. This allows a company to simply file certain documents and forms in court and the order then has effect once the formalities have been dealt with.
There is still a cost in this process but it is significantly lower than the cost of making a full application to the Court.
The procedure is still under the control of the Court and ultimately the Court has the power to determine procedural and other matters connected to the Administration. The Court is however reluctant, in general terms, to determine commercial matters leaving those for the Administrator to decide.