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Enterprise Act 2002

Administrator’s proposals and meeting of creditors

677.A diagram showing the conclusion of administration is at Annex H.

678.Paragraph 49 provides that, as soon as reasonably practicable, or, in any event, within 8 weeks of the administration commencing, the administrator is required to make a statement setting out proposals for achieving the purpose of administration, although this period can be extended with the permission of the court or with the consent of the creditors (see paragraphs 107 and 108). The administrator will send a copy of the proposals to the Registrar of Companies, the company’s creditors and every member of the company (the last obligation may be fulfilled by publishing a notice). In cases where the business of the company had to be sold under a short timescale to maximise the economic value, the administrator will report these facts to the creditors in his or her proposal.

679.Each copy of the administrator’s proposals sent to creditors must be accompanied by an invitation to an initial creditors’ meeting, which must be held as soon as reasonably practicable, or, and in any event, within ten weeks of the administration commencing, and on a prescribed period of notice (paragraphs 50 and 51). The time periods may be extended with the permission of the court or the consent of creditors (see paragraphs 107 and 108). If the administrator does not consider that it is reasonably practicable to rescue the company and/or achieve a better result for the creditors than on a winding-up, his or her statement must state why (paragraph 49).

680.The administrator’s proposals will take into account the purpose of administration, i.e.:


to rescue the company as a going concern (paragraph 3(1)(a));


if that is not reasonably practicable, or would not yield the best outcome for creditors, to achieve a better result for the company’s creditors as a whole than would have been achieved if the company were wound up (without first being in administration) (paragraph 3(1)(b));


if it is not reasonably practicable to achieve 3(1)(a) or 3(1)(b), to realise the company’s property and make payments to preferential and secured creditors (paragraph 3(1)(c)).

681.The administrator will present a copy of his or her proposals at the initial creditors’ meeting. If the administrator concludes that the company can be rescued as a going concern, he or she will put the proposal to the creditors and they will decide whether to accept an arrangement under which they will agree to accept less than full payment of their debts. This will usually be through a CVA or a scheme of arrangement under section 425 Companies Act 1985. The creditors could decide to reject the proposals or, with the consent of the administrator, amend them.

682.If company rescue is not deemed reasonably practicable, or would not yield the best outcome for creditors, the administrator will explain why this is so, and put the proposal to the creditors setting out how he or she plans to achieve a better result for the company’s creditors as a whole (e.g. as a result of selling the company’s businesses as going concerns to one or more buyers). The creditors will vote on whether to accept, modify or reject the proposal.

683.Where it is anticipated that there will be no funds available from the insolvent estate for unsecured creditors, outside those flowing from the abolition of Crown preference, the administrator will not be required to call a meeting of the creditors. This will also be the case where the administrator thinks there are funds to pay all creditors in full or that the first two objectives cannot be achieved. However, within the prescribed period, such a meeting may be requisitioned by creditors whose debts amount to at least 10% of the total debts of the company (paragraph 52).

684.An administrator’s statement of proposals may not include any proposal that affects the right of a secured creditor to enforce his or her security without his or her consent. In addition, the statement of proposals may not include any action that would result in a preferential debt being paid otherwise than in a priority to a non-preferential debt (paragraph 73).

685.A creditors’ meeting may only modify the administrator’s proposals with his or her consent (paragraph 53). The administrator cannot subsequently make any substantial revisions to the proposals without first obtaining the agreement of the creditors (paragraph 54).

686.After the conclusion of the initial creditors’ meeting (and any subsequent meeting), the administrator will report any decision taken to the court and the registrar of companies. If the creditors fail to approve the proposals, the court may provide that the administrator’s appointment shall cease to have effect, adjourn the hearing conditionally or unconditionally, make an interim order, make an order on a suspended petition for winding up, or any other order deemed appropriate (paragraph 55). Paragraph 57 makes provision for the establishment of a creditors’ committee.

687.Anything that is required to be done at or by a creditors’ meeting may be done by correspondence, including communicating electronically and by telephone or fax (paragraphs 58 and 111).

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Explanatory Notes

Text created by the government department responsible for the subject matter of the Act to explain what the Act sets out to achieve and to make the Act accessible to readers who are not legally qualified. Explanatory Notes were introduced in 1999 and accompany all Public Acts except Appropriation, Consolidated Fund, Finance and Consolidation Acts.


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