What are an administrator’s personal liabilities?
An administrator‘s role is important and may incur expenses depending on the size and complexity of the appointment. Debts that may arise from the administration include purchasing goods or services and hiring, leasing, using or occupying property.
These debts are paid from the available assets of the company as costs of the voluntary administration. However, the administrator is personally liable for debts incurred in the performance of the administrator’s functions if the company has insufficient funds available to cover these costs.
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.
If the administrator decides to continue to occupy or use the property, they will be personally liable for any rent or amounts payable arising after the end of the five business days.
The administrator will 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.
To have the benefit of this debt protection as a provider of goods or services to a company in voluntary administration, you should ensure you receive a purchase order authorised in the manner advised by the administrator.