Under the snappily entitled ‘Administration (Restrictions on Disposal etc to Connected Persons) Regulations 2021’ an Administrator must not make a substantial disposal of a company’s assets or business to a connected party within 8 weeks of their appointment unless either:
- The company’s creditors have approved of the disposal; or
- A ‘qualifying report’ in respect of the making of the disposal has been obtained.
As creditor approval will, as a consequence of the Administration procedure itself, usually only be obtained some time after the Administration appointment, the second option will become the default where a pre packaged sale is being considered.
The Regulations only apply to a disposal to a ‘connected person’ such as a director or shadow director of the company in Administration or an ‘associate’ of such person or the company itself.
Much of the debate on the Regulations has focussed on the requisite qualifications for the ‘evaluator’ preparing the ‘qualifying report’. The Regulations state that an evaluator is an individual who-:
‘..is satisfied that their relevant knowledge and experience is sufficient for the purposes of making a qualifying report”
The bar would therefore appear to be set fairly low with the evaluator’s opinion of their own competence and experience being the main qualification. It is, however, also a requirement that they have suitable professional indemnity insurance in place which might provide some commercial constraints on inappropriate individuals trying to enter the market.
For more details, please contact Jon Law at SWBR