Practice Guide 36 – Administration and receivership

Updated: April 2013

Update

This edition of the guide replaces the January 2013 edition. Updates have been made as a consequence of The Companies Act 2006 (Amendment of Part 25) Regulations 2013.

Scope of this guide

This guide gives advice on the land registration aspects of transactions by administrators and administrative receivers appointed under the provisions of the Insolvency Act 1986 and receivers appointed under the provisions of the Law of Property Act 1925. It is aimed at administrators, administrative receivers, conveyancers and other legal advisers and you should interpret references to ‘you’ accordingly. Land Registry staff will also refer to it.

1 Abbreviations and terms used

In this guide:

‘administrator’ is an administrator appointed under the provisions of s.8 and Sch B1, IA 1986

‘administrative receiver’ is a receiver or manager appointed under the provisions of ss.28 to 49, IA 1986

‘CA 1985’ means the Companies Act 1985

‘CA 2006’ means the Companies Act 2006

‘conveyancer’ means an authorised person within the meaning of s.18 Legal Services Act 2007 who is entitled to provide the conveyancing services referred to in paragraphs 5(1)(a) and (b) of Schedule 2 to that Act, or a person carrying out those activities in the course of their duties as a public officer. It also includes an individual or body who employs or has among their managers such an authorised person who will undertake or supervise those conveyancing activities (r. 217A LRR 2003)

‘debenture’ is the mortgage or charge, whether legal or equitable, under which the administrative receiver or the receiver is appointed

‘IA 1986’ means the Insolvency Act 1986, as amended

‘insolvency practitioner’ means a person who is authorised to act as an insolvency practitioner by virtue of:

(a) membership of a body recognised pursuant to s.391, CA 2006
(b) an authorisation granted pursuant to s. 393, CA 2006

‘IR 1986’ means the Insolvency Rules 1986

‘LPA 1925’ means the Law of Property Act 1925

‘LPA receiver’ is a receiver or manager appointed under the provisions of s.109, LPA 1925

‘LRA 2002’ means the Land Registration Act 2002

‘LRR 2003’ means the Land Registration Rules 2003

‘Sch B1’ means Schedule B1 to the Insolvency Act 1986 (inserted by the Enterprise Act 2002).

2 Introduction

This guide gives information about the land registration aspects of estate transactions by administrators and administrative receivers appointed under the provisions of the IA 1986.

For matters relating to receivers appointed under the provisions of the LPA 1925, please see Practice Guide 36A – Receivers appointed under the provisions of the Law of Property Act 1925. For matters relating to personal or corporate insolvency, please see Practice Guide 34 – Personal insolvency and Practice Guide 35 – Corporate insolvency.

3 Administrators

3.1 Appointment and powers

An administrator is a person appointed under Sch B1 to manage the affairs, business and property of a company. An administrator must be an insolvency practitioner (paragraph 6 of Sch B1).

An administrator can be appointed by either:

• an administration order made by the court (under paragraph 10 of Sch B1)

• the holder of a qualifying floating charge (under paragraph 14 of Sch B1), or

• the company or its directors (under paragraph 22 of Sch B1).

A qualifying floating charge is one which either:

• states that paragraph 14 of Sch B1 applies to it

• authorises its holder to appoint an administrator, or

• authorises its holder to appoint a receiver who would be an administrative receiver.

A person holds a qualifying floating charge if they hold either:

• a qualifying floating charge (or a number of such charges) which relates to the whole or substantially the whole of the company’s property, or

• charges and other forms of security which together relate to the whole, or substantially the whole, of the company’s property, and at least one of which is a qualifying floating charge.

Where the administrator is appointed by the court, the appointment takes effect at a time appointed by the order, or if no time is appointed, when the order is made (paragraph 13(2) of Sch B1).

Where the administrator is appointed by the holder of a floating charge, the company or the directors, the appointment takes effect when the appointor files in court a notice of appointment accompanied by the prescribed documents (paragraphs 19 and 31 of Sch B1). The notice must be in form 2.6B (if the appointment is by the holder of a floating charge) (r.2.16, IR 1986), form 2.7B (if the appointment by the holder of the floating charge is filed by fax out of normal hours), form 2.9B (if the appointment is by the company) or form 2.10B (if the appointment is by the directors) (r.2.23, IR 1986). The court will issue to the appointor two sealed copies of the notice of appointment, endorsed with the date and time of appointment. The appointor must send one of these to the administrator as soon as reasonably practicable (rr.2.17 and 2.26, IR 1986).

Where joint or concurrent administrators are appointed, the appointment must specify which (if any) functions are to be exercised jointly and which (if any) are to be exercised by any or all of the appointees (paragraph 100, Sch B1). If the appointment is silent on this point, then Land Registry will require a separate statement or certificate to confirm the position.

The administrator must perform their functions with the objective of rescuing the company as a going concern or, failing that, achieving a better result for the company’s creditors as a whole than would be likely if it were wound up. If neither objective is reasonably practicable, they may realise property in order to make a distribution to one or more secured or preferential creditors (paragraph 3 of Sch B1).

The administrator may do anything necessary or expedient for the management of the affairs, business and property of the company. Without prejudice to the generality of that, they have the powers specified in Schedule 1, IA 1986. These include power to sell and to grant or accept a surrender of a lease. The administrator can use the company seal and execute any deed, receipt or document in the name of and on behalf of the company. There is no express power to make a gift. A person dealing with the administrator in good faith and for value need not inquire whether the administrator is acting within their powers (paragraphs 59 and 60 of Sch B1). The administrator acts as the agent of the company (paragraph 69 of Sch B1).

3.2 Relationship with liquidation and receivership

An administrator cannot be appointed while the company is in liquidation, except by the court on the application of the liquidator or, in some circumstances, on the application of the holder of a qualifying floating charge. If the court appoints an administrator it will discharge any winding-up order (paragraphs 8, 37 and 38 of Sch B1).

A company that is in administration cannot normally be placed in liquidation (paragraphs 40 and 42 of Sch B1).

Where a company is in administrative receivership an administrator can be appointed only by the court, and only in the limited circumstances set out in paragraph 39 of Sch B1. The appointment of an administrator automatically dismisses any administrative receiver of the company (paragraph 41(1) of Sch B1). An administrative receiver cannot be appointed while the company is in administration (paragraph 43(6A) of Sch B1).

The existence of an LPA receiver does not prevent an administrator being appointed, nor is an LPA receiver automatically dismissed if this happens. However, an LPA receiver must vacate office if required to do so by the administrator (paragraph 41(2) of Sch B1).

3.3 Other effects of administration

While a company is in administration its property remains vested in it, but in the absence of the consent of the administrator or the court (paragraph 43 of Sch B1):

• no security over the company’s property can be enforced

• goods held by the company under a hire-purchase agreement cannot be repossessed

• no one can start or continue proceedings or any other legal process against the company

• a landlord cannot forfeit a lease belonging to the company by peaceable re-entry.

3.4 Noting the appointment of an administrator

You can apply to note the appointment of an administrator in the register (r.184, LRR 2003, as amended by The Enterprise Act 2002 (Insolvency) Order 2003). You must supply:

• form AP1

• the fee payable under Article 12 of the current Land Registration Fee Order, and either

• an office or certified copy of the order of the court appointing the administrator and showing the date and time of the appointment, or

• a sealed copy of the notice of appointment in form 2.6B, 2.7B, 2.9B or 2.10B (prescribed under the IR 1986), as appropriate

• in the case of joint or concurrent administrators, a statement or certificate to comply with paragraph 100, Sch B1, if the instrument of appointment does not contain this information.

You may send us a certified copy of the notice of appointment instead of an original sealed copy, but it must be a copy of a sealed copy showing the date and time of filing.

Note that form 2.12B (although it is headed ‘Notice of administrator’s appointment’) is not sufficient. This form is prescribed under the IR 1986 for cases where an administrator is required to give notice to any person under those rules or the IA 1986. There is no requirement in the IA 1986 or IR 1986 to give notice to Land Registry. It is therefore not the ‘notice of appointment’ referred to in r.184, LRR 2003. That rule refers to the notice filed in court under paragraph 18 or 29 of Sch B1 (ie form 2.6B, 2.7B, 2.9B or 2.10B).

We will make the following entry in the proprietorship register:

“(Date) By [an order of the Court made on] [a notice of appointment filed on] (date) AB of (address) was appointed administrator of XY Limited”.

An application to note the appointment of an additional or replacement administrator may be made in the same way.

To cancel this entry, apply in form AP1, with evidence that the administration has come to an end. There is no fee. The evidence will normally be either:

• an office or certified copy of a court order, or

• a certified copy of an appropriate notice registered with the Registrar of Companies. Depending on the circumstances, this may be any of forms 2.30B, 2.32B, 2.33B, 2.34B or 2.35B, prescribed under rr.2.110, 2.111, 2.113, 2.116, 2.117 and 2.118, IR 1986.

Although administration normally terminates automatically after one year, this period can be extended (see section 3.5 Dispositions by an administrator). We will not cancel the entry merely on grounds of the lapse of time without evidence that an appropriate notice has been registered with the Registrar of Companies.

3.5 Dispositions by an administrator

Unless the appointment is noted in the register as described in section 3.4 Noting the appointment of an administrator, you must supply evidence of the administrator’s appointment when applying to register any disposition made by the administrator.

The evidence must be an office, sealed or certified copy of the court order or notice of appointment, as described in section 3.4 Noting the appointment of an administrator. The appointment of an administrator ceases to have effect after one year, unless extended. It can be extended only for a specific time and only by either:

• an order of the court, or

• (once only and for not more than six months), consent of all the secured creditors and a majority of the unsecured creditors of the company (paragraphs 76 to 78 of Sch B1).

Therefore, if a disposition is made by an administrator more than one year after the company went into administration, you must supply evidence that the administrator’s appointment has been extended, whether or not their appointment has been noted in the register. The evidence should be either:

• an office copy or certified copy of the relevant order of the court, or

• a certified copy of a notice of extension in form 2.31B.

The court can also make an order to end the administration. The administrator must send a copy of the court order to the Registrar of Companies within 14 days (beginning with the date of the order).

The administrator can dispose of the company’s property free from any floating charge as if it were not subject to that charge (paragraph 70 of Sch B1) – the charge holder is then entitled to the same priority over any property of the company that represents the property disposed of. When you lodge such an application our requirements for removing notice of the floating charge will depend upon how it was entered in the register.

Where a floating charge has been entered either:

• as an agreed notice

• by the registrar on first registration of the registered estate, or

• under the provisions of the Land Registration Act 1925

we will require a form CN1 signed by the administrator, with panel 12 clearly stating that the disposal is ‘pursuant to paragraph 70 of Schedule B1 to the Insolvency Act 1986’.

Where a floating charge has been entered as a unilateral notice, it can be removed by the beneficiary (applying in form UN2), or the registered proprietor, or a person entitled to apply to be registered as proprietor, can apply to cancel it using form UN4, in the usual way (see Practice Guide 19 – Notices, restrictions and the protection of third party interests in the register).

The administrator can dispose of the property free from any other charge with the authorisation of the court (paragraph 71 of Sch B1). In such a case you will need to lodge, with the application to register the disposition, an office or certified copy of the court order authorising disposal free from the charge, so that the registration (or notice) of the charge can be cancelled.

3.6 Acquisition of an estate by a company in administration

When, with the authorisation of the court, an administrator has disposed of a company’s property free from a charge as described in section 3.5 Dispositions by an administrator, the chargee is entitled to their original priority over any new estate the company acquires with the proceeds (paragraph 70(2) of Sch B1).

For that reason, when registering a company that we know is subject to an administration order as proprietor of an estate, we will make the following entry in the charges register:

“(Date) The registered estate is subject to such security or securities as may exist and affect the same by virtue of the provisions of paragraph 70(2) of Schedule B1 to the Insolvency Act, 1986”.

We will cancel the entry, or any similar entry referring to s.15(4), IA 1986, if a certificate by the administrator or the administrator’s conveyance is produced that no such securities affected the title or, where they did, that they have been discharged. A form CN1 will be required but there will be no fee.

3.7 Execution by administrator

A company in administration executes deeds either by affixing the company seal in the presence of the administrator (paragraph 60 of Sch B1 and paragraph 8 of Schedule 1, IA 1986), or by the administrator signing in the name and on behalf of the company (paragraph 60 of Sch B1 and paragraph 9 of Schedule 1, IA 1986, and s.74(3), LPA 1925).

The following are the suggested forms.

Where the company seal is used:

Where the company seal is not used:

4 Administrative receivers

4.1 Definition

An administrative receiver is either:

• a receiver or manager of the whole (or substantially the whole) of a company’s property appointed by, or on behalf of, the holders of any debentures of the company secured by a charge which, as created, was a floating charge, or such a charge and one or more other securities, or

• a person who would be such a receiver or manager but for the appointment of some other person as the receiver of part of the company’s property (s.29(2), IA 1986).

4.2 Appointment

Appointment may be by the court or under powers contained in a debenture. An administrative receiver must be an insolvency practitioner (s.388, IA 1986) and must confirm acceptance of appointment (r.3.1, IR 1986).

If the appointment is under powers contained in a debenture created by deed, a statutory power arises when:

• the mortgage money has become payable

• the power of sale is exercisable (ss.101(1),103 and 109, LPA 1925).

The statutory power may be varied, extended or excluded by the debenture, which may contain an express power to appoint (ss.109(3) and 101(4), LPA 1925). Any well drawn debenture will contain express provisions determining when an appointment may be made.

However, an administrative receiver cannot be appointed by the holder of a debenture dated on or after 15 September 2003, notwithstanding any provision contained in the debenture (s.72A, IA 1986, which came into force on that day).

This is subject to limited exceptions set out in ss.72B to 72GA, IA 1986.

The debenture holder may make the appointment under the statutory power by writing under hand.

If joint administrative receivers are appointed the appointment must state whether they can act jointly and severally (s.231(2), IA 1986).

4.3 Powers of an administrative receiver

The powers given to an administrative receiver by the debenture are deemed to include the statutory powers specified in Schedule 1, IA 1986 except in so far as they are inconsistent with the provisions of the debenture (s.42(1), IA 1986).

The Schedule 1 powers include power to sell and to grant, or accept a surrender of, a lease. There is no express power to make a gift.

A person dealing with an administrator in good faith and for value is not concerned to enquire whether the receiver is acting within his powers (s.42(3), IA 1986).

An administrative receiver must vacate office when an administration order in respect of the company takes effect (s.8, IA 1986; paragraph 41(1) of Sch B1).

See section 6 The effect of liquidation on the administrative receiver’s powers for the effect of liquidation on the administrative receiver’s powers.

4.4 Execution by administrative receiver

4.4.1 Pursuant to statutory powers in IA 1986

An administrative receiver has a statutory power to use the company’s seal and to execute any deed in the name and on behalf of the company (s.42(1) and Schedule 1, IA 1986). In practice it is this statutory power which is likely to be used, rather than a power of attorney described below.

The suggested form of execution where the company’s seal is not used is:

4.4.2 Pursuant to general agency power contained in the debenture

Usually the debenture will also give the administrative receiver the right to sell or otherwise dispose of the company’s property. Such a power includes the power to execute in the name and on behalf of the company and will survive liquidation (Barrows v Chief Land Registrar, The Times, 20 October 1977). In such a case the following form of execution is suggested.

4.4.3 Pursuant to specific powers of attorney contained in the debenture

Alternatively, the debenture may grant a power of attorney in favour of the administrative receiver. Such a power is not a security power and will not survive liquidation (see section 6 The effect of liquidation on the receiver’s powers). If the receiver executes as attorney, then, even if the power is under 12 months old, the applicant for registration will need to lodge with the application either:

• a statutory declaration or statement of truth declaring (if such is the case) that they did not, at the time of the completion of the transaction, know of any revocation of the power or know of the occurrence of any event (such as the winding-up of the company) which had the effect of revoking the power, or
  
• a certificate signed by a conveyancer certifying (if such is the case) that the applicant did not, at the time of completion of the transaction, know of any revocation of the power or know of the occurrence of any event (such as the winding-up of the company) which had the effect of revoking the power.

4.4.4 Sealing by the company

The deed can also, at the direction of the administrative receiver, be sealed by the company using its common seal in the presence of the duly authorised officers of the company, or signed as a deed by a director or secretary of the company.

5 Register entries on appointment of a receiver

The debenture under which the administrative receiver is appointed should already be registered or noted against the title. As the property remains vested in the company, you cannot have the receiver registered as proprietor of the title nor can you have notice of the receiver’s appointment entered in the register.

The receiver will want to ensure that the company’s address for service in the register is one at which any notices served by us will be received. The receiver may change the address or add an additional address (a maximum of three addresses are allowed (r.198, LRR 2003).

If you want to lodge such an application, we require:

• a form AP1

• a certified copy of the appointment of the receiver

• a certified copy of the debenture (if it is not already registered or noted and a copy filed).

No fee is payable for this application.

6 The effect of liquidation on the administrative receiver’s powers

A receiver is agent of the company. On liquidation this agency comes to an end but the receiver continues to have power to act for the purposes of holding and disposing of the company’s property and may use the company’s name for that purpose (Sowman v David Samuel Trust Ltd [1978] 1 All ER 616).

As indicated in section 4.4 Execution by administrative receiver, a specific power of attorney created by the debenture in favour of the administrative receiver is not a security power and will be revoked by the winding-up of the company. However, the debenture usually gives the receiver a general agency power to sell, or otherwise dispose of, the company’s property. Such a power will include the right to execute in the name and on behalf of the company and that right will continue after winding-up commences (Barrows v Chief Land Registrar, The Times, 20 October, 1977); the right to convey in the name of the company is necessary to the completion of sales made in exercise of the receiver’s power to sell, which does survive liquidation.

In a winding-up by the court, any disposition of the company’s property after commencement of the winding-up is void unless sanctioned by an order of the court (s.127, IA 1986). However, where a debenture has been created prior to the winding-up proceedings, any subsequent disposition by the debenture holder or receiver under general agency powers contained in the debenture (see above) which takes place after winding-up commences does not require an order of the court.

The provisions of ss.238 to 241 and 244 and 245, IA 1986 which relate to transactions at an undervalue, preferences, extortionate credit transactions and the avoidance of certain floating charges, may have the effect of invalidating the debenture wholly or in part. If, when an application based on a disposal by a receiver is being considered, there is any suggestion that the liquidator may seek to have the debenture avoided under these provisions, we may serve an appropriate notice giving an opportunity for objection. If the applicant is aware of any such challenge you must disclose it to us when the application is lodged.

7 Release of an estate from mortgages and charges on a disposition by an administrative receiver

An administrative receiver is agent of the company not of the debenture holder (s.44(1)(a), IA 1986; s.109(2), LPA 1925).

An administrative receiver therefore has no power to discharge the company’s property from any mortgage or charge, including the debenture, regardless of whether the mortgage or charge was created before or after the debenture.

On a sale by an administrative receiver the purchaser must ensure that a release is obtained for all mortgages and charges from which that purchaser is to take the property free. This includes the need to obtain a release from the debenture itself and from any mortgages and charges dated after it.

However, the court may order that a property may be disposed of free from a registered or noted charge ranking after the debenture under which the administrative receiver was appointed, where the receiver can satisfy the court that the property can be more advantageously disposed of free from the charge (s. 43, IA 1986). An office or certified copy of the court order should be lodged with any application to register the disposition and to cancel the charge entry from the register.

8 Evidence required to support an application for registration based on a disposition by an administrative receiver

If your application for registration is based on a disposition by an administrative receiver, in addition to the normal evidence, we will require:

• the debenture or a certified copy of it [this should already be with us if the title is registered and the debenture is registered or noted]

• evidence that the power of appointment of a receiver under the debenture has arisen

• the instrument of appointment of receiver or a certified copy of it

• a release or discharge from all mortgages or charges, including the debenture, from which the applicant is to take the property free

• if the receiver executes as attorney, evidence of non-revocation

• details of any challenge to the validity of the debenture by a liquidator of the company, including the name and address of the liquidator

9 Enquiries and comments

If you have a particular concern which is not covered by this guide, please contact Land Registry in advance of the transaction – see Contact details. If the transaction is particularly complex it may be better if you make your enquiry in writing at the Land Registry office which will process your application.

If you have any comments or suggestions about our guides, please send them to:

Central Operations Group
Land Registry
Trafalgar House
1 Bedford Park
Croydon CR0 2AQ

(DX 8888 Croydon 3)

You can obtain further copies of this and of all our guides free of charge from Customer Support (see Contact details) or you can download them from our website.

Remember

• If the application is by an administrator, have you supplied the administration order?

• If the application is by an administrative receiver, have you supplied evidence of their appointment?

• If an administrative receiver has acted as an attorney, has the evidence of non-revocation been lodged?

• Have you enclosed the correct fee (see the current land negotiation Fee Order)?

• Have you used a form AP1?

• Important: please check clerical details in all forms and deeds (especially charges and mortgages) and pay particular attention to all dates, property descriptions, title numbers, and full names of parties, especially where they appear in more than one deed.

Please note that Land Registry may be unable to process applications that are incomplete or defective and your application will risk losing its priority if we have to return it to you – see Practice Guide 49 – Return and rejection of applications for registration for more information.