A Notice of Intention (or NOI) to appoint Administrators is a preliminary process used by a Company to inform certain parties that it intends to go into Administration. The NOI document is submitted to Court and has the effect of immediately stopping any ongoing or threatened creditor legal action against the Company.
Why file an NOI?
The use of the NOI process can be an effective way of staving off imminent creditor enforcement action, which might otherwise stop a Company being able to implement a rescue plan that could lead to the survival of all or part of its business and the protection of some or all of the jobs involved, or else which could lead to a worse outcome for the creditors.
How is an NOI filed?
The Company must notify any Qualifying Floating Charge Holders (QFCH) as well as the supervisor of any active Company Voluntary Arrangement (CVA) already in place, at least five business days before the NOI is filed at court.
A QFCH is usually the main funder for the company, such as a bank, but it could be a private individual or some other non-specialist lender. The documentation for their lending facility will give the right to object to the company’s choice of Administrator if they wish. They can appoint their own Administrator, but this is unusual provided the Company can show that there is a clear plan for the Administration and the nominated Administrator is acceptable to the QFCH.
The NOI must state the names and addresses of the Administrators to be appointed, as well as other information about the Company and its financial situation.
Who is allowed to file an NOI?
The Company, its Directors or a QFCH, can all file the NOI with the court. Once this has been done, Administrators of their choice will be appointed in due course.
A QFCH can object if they disagree with the Administrator chosen. Although this only rarely happens, they then have the power to appoint their own choice of Administrators under these circumstances.
What is the effect of filing an NOI?
The NOI helps businesses by temporarily halting existing or pending creditor action – it sets up a moratorium that protects them, provides them with the breathing space and time in which they can take positive action.
Once the NOI has been filed at court, any enforcement action by creditors can only proceed with the permission of the Court. Although the moratorium period is only 10 business days initially, this is often sufficient time to steer a company away from the immediate risk of Liquidation.
Can an NOI be extended?
It can be possible to persuade the Court to grant an additional 10 days’ protection from creditor action. This could be when a potential solution to the Company’s difficulties has been worked out but more time is needed to implement the plan.
It is rare for Courts to agree to repeated delays beyond a first extension. Tactical applications made in an attempt to gain more time run the risk of being ruled as an abuse of the NOI process.
When can the Court refuse to allow the filing of an NOI?
So long as the company has not entered administration during the preceding 12-month period, or has an active winding up petition against them, an NOI is likely to be accepted by the court.
If you are seeking professional advice for your business, Opus is here to help. You can speak to one of our Partners, who can discuss options with you. We have offices nationwide and by contacting us on 020 3995 6380, you will be able to get immediate assistance from our Partner-led team.