As Vee Bharkhada, Founder & Managing Director of Navigate Business Recovery Ltd, I frequently work with directors facing the significant pressures of a company in Administration. Having navigated the complexities of insolvency for well over three decades, I’ve seen that one of the most critical, yet sometimes overlooked, duties is the requirement to cooperate fully with the appointed Administrator.
This isn’t a mere suggestion; it’s a strict legal duty under paragraph 64 of Schedule B1 to the Insolvency Act 1986.
The Unwavering Duty to Cooperate
When a company enters Administration, an Administrator is appointed to manage its affairs, with the goal of achieving a better outcome for creditors. For directors, this triggers an immediate and ongoing obligation to provide information, hand over company books and records, and assist the Administrator in their investigations.
My long standing involvement in business recovery and company closures has shown me that this duty is fundamental. Any obstruction, delay, or failure to provide accurate information is viewed very seriously by the authorities.
Escalation for Non Cooperation
The consequences of failing to cooperate are not minor. For directors with public profiles or those involved in companies with complex holdings, this lack of cooperation can escalate quickly and dramatically. What might seem like a simple oversight or a delay can rapidly lead to civil enforcement, such as Court orders compelling compliance, or even more severe criminal enforcement.
Investigators are adept at identifying non cooperation, and they will pursue breaches vigorously. The reputational damage alone for directors can be immense, quite apart from the legal penalties.
My Guidance on Cooperation
My advice to any director whose company is in Administration is always consistent and clear:
- Prioritise Engagement: Actively and promptly engage with the Administrator. Respond to all requests for information or meetings without delay.
- Be Thorough: Ensure that all requested documents and information are accurate, complete, and provided in the specified timeframe.
- Seek Clarification: If you are unsure about any request or your obligations, ask the Administrator for clarification, or better yet, seek independent legal advice immediately.
- Avoid Obstruction: Do not conceal information, destroy documents, or in any way hinder the Administrator’s work. Such actions will be severely penalised.
Failing to cooperate with an Administrator is a direct breach of your legal duty and can lead to very serious personal and professional repercussions. Proactive and transparent cooperation is always the best course of action to protect your position and reputation.
Disclaimer: This article provides general information and guidance only and does not constitute legal or professional advice. Each situation is unique, and you should seek specific advice tailored to your circumstances. Navigate Business Recovery Ltd accepts no liability for any loss incurred as a result of acting or refraining from acting on information contained in this article.
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Reusing a company name after administration without court approval breaches section 216 of the Insolvency Act 1986, and this phoenix activity is a criminal offence, even if done indirectly or through a nominee.
Transferring business assets without the Administrator’s approval is unlawful under paragraph 43 of Schedule B1 and section 234 of the Insolvency Act 1986, and can result in criminal prosecution for asset diversion.
Failing to disclose connected party transactions during a pre pack sale is a regulatory breach under SIP 16, and for those with layered corporate structures, transparency is essential to avoid professional sanctions.
Providing misleading business valuations to justify a pre pack sale is a criminal fraud offence under the Fraud Act 2006, and the higher the valuation gap, the stronger the inference of intent.
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