Q&As

A is in administration and owes a sum to B. B owes a sum to A. What steps can B take?

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Published on LexisPSL on 21/11/2017

The following Restructuring & Insolvency Q&A provides comprehensive and up to date legal information covering:

  • A is in administration and owes a sum to B. B owes a sum to A. What steps can B take?
  • Legal process against the company
  • Administrator’s powers
  • Set off
  • Which types of claims are eligible for insolvency set-off?

In this Q&A, we have assumed that B’s claim is smaller than A’s.

Legal process against the company

Under paragraph 43(2) of Schedule B1 to the Insolvency Act 1986 (IA 1986), a moratorium provides that no legal process (which includes legal proceedings, execution, distress and diligence) may be commenced or continued against the company or its property without the consent of the administrator, or the permission of the court. This is sufficiently broad to cover any remaining actions and steps that might be taken against the company or its property. This means that B can only bring an action against A with the permission of the administrator or the court. The purpose of the moratorium (and interim moratorium) is to protect the company and its assets from creditor action during the period of the company's administration (and the pre-appointment period). The moratorium prohibits any steps, actions and processes from being commenced or continued with against the company and its property, except with the consent of the administrator (if one is appointed) or the permission of the court. See Practice Note: The moratorium in administration for more information.

The administrator's consent should first be sought before an application to court is made seeking permission. If the administrator does not give consent, it is then that the application to court should be made. For further reading on seeking the

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