Q&As

Company A has the benefit of a debenture from company B. B intends to enter a creditors voluntary liquidation which is an event of default under the debenture. B has not missed a payment due to A and there is no accelerated payment clause. Can A appoint an administrator/receiver to B, and does the security cover the full debt or only the outstanding amount?

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Published on LexisPSL on 18/03/2019

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

  • Company A has the benefit of a debenture from company B. B intends to enter a creditors voluntary liquidation which is an event of default under the debenture. B has not missed a payment due to A and there is no accelerated payment clause. Can A appoint an administrator/receiver to B, and does the security cover the full debt or only the outstanding amount?
  • Enforcement—general
  • Appointment of administrators
  • Appointment of receivers
  • Secured liabilities

Company A has the benefit of a debenture from company B. B intends to enter a creditors voluntary liquidation which is an event of default under the debenture. B has not missed a payment due to A and there is no accelerated payment clause. Can A appoint an administrator/receiver to B, and does the security cover the full debt or only the outstanding amount?

Enforcement—general

Generally, a creditor’s rights of enforcement will be expressly provided for in the debenture itself (together with the instrument creating or evidencing the secured liabilities) and therefore, how and when a creditor can enforce its security will usually be a matter of construction of those documents. Implied powers of enforcement are rarely relied upon and usually only help where the secured liability has become payable (see Commentary: Part 2: When can the creditor exercise his powers?: Taking Security [9.27]).

See Practice Note: Enforcement—debentures and floating charges.

Appointment of administrators

For information on appointment of administrators, see Practice Notes:

  1. Out-of-court appointments—who can apply and in what circumstances?

  2. Out-of-court administration appointments—the procedure

You will note that, in relation to an out-of-court appointment of administrators, paragraph 14 of Schedule B1 to the Insolvency Act 1986 (IA 1986) provides that the holder of a qualifying floating charge in respect of a company’s property may appoint an administrator. The first step will be to ensure that the debenture is a

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