Since the 1986 Insolvency Act, insurance and reinsurance companies were the only companies unable to take advantage of the administration order procedure, introduced by the Act to promote a ‘rescue culture’ in the UK. As a result, a practice has developed using the appointment of provisional liquidators to obtain, by a different route, the protection which would be conferred by an administration order.
Administration orders were designed to rescue insolvent companies, or at least give them breathing space to organise their affairs and an appropriate means of effecting a return to their creditors which would have been more beneficial than a liquidation. Once an administration order has been made the company is protected from winding up proceedings and any steps a creditor might take to seize the company’s assets in satisfaction of a claim. Similar protection applies following the appointment of provisional liquidators.
