Guest article by Shajib Mahmood Alam, Barrister of Lincoln’s Inn.
Abstract
This paper analyses the new Administration procedure introduced by the Enterprise Act 2002 (EA 2002) in the United Kingdom. Before the EA 2002 came into force, administrative receivership was the preferred mode of debt enforcement against distressed companies by banks holding fixed and floating charges. This was widely seen as too detrimental to the interests of unsecured creditors and businesses.
The paper examines:
- The case against receivership — why the old regime was viewed as failing junior creditors and viable companies.
- The “obsession with rescue” — Parliament’s acceptance of the need for a modern company rescue regime, and the streamlined administration procedure brought by Schedule B1.
- Administration as a rescue mechanism — figures showing administrations rose from 649 in 2002–3 to 2,661 in 2005–6, while receiverships fell sharply.
- Whether the new regime actually allows companies to restructure themselves — drawing on Insolvency Service evaluations and Dr. Sandra Frisby’s research findings.
- The case for a Debtor-in-Possession (DIP) model — and proposals such as super-priority financing and court-supervised restructuring.
- A critical comparison with US Chapter 11 — and the European High Yield Association’s proposals for cram-down and judicial valuation.
Conclusion
The new Act made a mixed first impression. While it succeeded in reducing the duration of insolvency proceedings and shifting practitioners toward administration, the corporate rescue rate has remained largely unchanged from receivership-era figures. Reform proposals — including a DIP-style regime and super-priority funding — remain on the legislative horizon.
The full essay, with bibliography and footnote citations to academic sources, is available on request from S Hossain & Associates.
Copyright © Shajib Mahmood Alam.