THE ADMINISTRATOR’S PERSONAL LIABILITY

Personal liability

The administrator is personally liable for debts of the company incurred in the performance of the administrator’s functions and powers, for services rendered, goods bought and property hired, leased, used or occupied by the company; but is entitled to a right of indemnity out of the company’s property for that liability: ss443A and 443B.

The administrator will therefore need to be satisfied that the company has sufficient free assets out of which to meet the statutory indemnity and/or has an agreement with the principal creditors to the effect that the administrator’s liabilities will be met.

The administrator is not taken to have adopted existing agreements. Suppliers of essential services (electricity, gas, water or a telecommunication service) are specifically prohibited from insisting on the payment of arrears as a condition of further supply: s600F.

Where the company entered into an agreement prior to the administration, to use the property of which someone else is the owner or lessor, the administrator has five business days within which to decide whether or not to continue to use the property. Unless the administrator gives a notice to the owner or lessor of the property within five business days after the beginning of the administration, the administrator will be personally liable for amounts due under the agreement while he uses or keeps possession of the property or goods.

Indemnity

The administrator is entitled to an indemnity out of the company’s property for remuneration and personal liabilities incurred during the administration. The indemnity has priority over debts of the company secured by a floating charge on property, unless the chargee has either commenced enforcement of or actually enforced the charge before the administration began.