Understanding the consequences of a notice of intent
As mentioned above, a notice of intent indicates the business is looking to appoint an administrator. This is an option for those companies looking to identify a solution to their financial issues and looking for immediate debt advice. The notice of intent is filed at the court. If accepted, any action by the creditors must then be agreed upon with the court. When, the notice of intent has been filed, the company receives a moratorium for a period of 10 business days. The notice of intent should only be filed if there is a genuine intention to place the company into administration.
Multiple notices of intent
Where a notice of intent has been filed, but there has been no appointment of an administrator in the 10 business days, it’s possible to submit a further notice. This would result in another window for the moratorium to be put in place. However, you must err on the side of caution when filing multiple notices. The court may view this as an abuse of the ‘breathing space’, providing you with more time to consider your options. However, they may offer further moratorium if you can identify a solution has been identified and you are working towards a viable option for the business. It’s important to note this extension must be in the direct interest of the creditors and the repayments owed.
How do I file the notice?
The company directors or floating charge holders (QFCH) can file the notice of intent. However, you cannot file the NOI in the absence of a floating charge holder on which to serve the notice. If you do see this as your only option, and have received debt advice prior, you have five business days minimum to provide the written notice to the QFCH. Typically, the floating charge holders are the bank, and this window is to provide them an opportunity to appoint their own administrator.
As mentioned above, once the notice of insolvency has been filed, creditors are not able to take further action. To do so, they must seek the approval of the court. However, this is unlikely if the notice has already been accepted given the short timescales.
Reasons for the notice
The most important thing you can do when you begin to notice any financial issues is to seek immediate debt advice. The earlier you speak to a professional for guidance, the more options there are available for your company. If you leave it as late as possible, your creditors could submit a winding up petition, which, generally, results in complete closure of the company.
Administration is often used as a chance for company restructure. Recently, the company administration procedure has hit the headlines, with the likes of Poundworld and Toys R Us entering the insolvency procedure. House of Fraser has also been in the news and is currently negotiating a CVA to make repayments to creditors. This was similar to the initial Toys R Us plan, but they failed to make their repayments, thus entering administration.
The company administration procedure must be sanctioned by a licensed insolvency practitioner as the most suitable after any other alternatives. Likewise, the issue of creditor dividends must be taken into account. Pre-pack administration, for instance, can result in much higher returns for creditors and is in their interest.
If you do believe administration is the next step for your business, speak to our business rescue experts today for free, confidential advice.