2 Mins
New regulations* were introduced in April last year which required a qualifying report to be obtained in relation to a sale of the business and assets of a company in administration to a connected person within the 8 weeks following the appointment of administrators.
Often a sale to the directors, or other connected parties, can be seen as suspicious by the creditors. A qualifying report is prepared by an independent party with relevant experience. If you are giving advice to directors who wish to buy their business from administrators, you will need to advise that this is a legal requirement so must be obtained. Administration sales tend to happen at great speed, and it is better to introduce the independent party to review the proposed transaction as early as possible. The later the involvement of the independent party, the more likely a delay to the completion of any sale.
The report must contain information about the transaction, and the assets being sold and will conclude that either the reporter is satisfied that the consideration to be provided for the relevant property and the grounds for the substantial disposal are reasonable in the circumstances or that the report is not satisfied. The reasons supporting that statement must also be given.
When an Administrator makes a sale of the business and assets following receipt of a report the Administrator must send a copy of the report to all creditors of the company at the same time as the statement of their proposals is sent. If a client has concerns about a sale to a connected party, you should guide them to this report which will provide should alleviate the concerns. We have prepared several qualifying reports and will be happy to discuss further if it doesn’t.
*Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021 (“the Regulations”).
