IN DEFENSE OF THE ADMINISTRATORS
No more cynical sniping at the Administrators because I am annoyed at the secrecy of, and lack or transparency of, the process, unless of course they prove otherwise.
And here's why:
On 30 April 2020 - Appointment of Voluntary Administrators. "The Voluntary Administrators are reviewing the Company's business and assets and will be in contact with creditors shortly".
On 8 May 2020 - "Voluntary Administrators are continuing to assess the assets and business of the Company"
On 12 May 2020 - binding sale transaction for Magnolia etc. for USD 2.25 million.
By this time, I assume that the creditors have been included in discussions.
Now here's the rub. From Sewell and Kettle
"Here we set out five reasons why you may need to think twice before appointing a voluntary administrator:
- Insolvency is now harder to prove (for directors – that’s a good thing), and where a company is insolvent, there is new protection for directors;
- Voluntary administration is rarely successful. In many cases, it’s a ‘glorified liquidation’;
- Voluntary administrators are not required by law to be transparent with directors;
- Attracting new finance is nigh-on impossible during voluntary administration;
- Creditors with little stake can hold the process to ransom and effectively force a liquidation.
These reasons are repeated on other legal sites.
So what can we conclude from this? It is quite conceivable that the sale of Magnolia would not have proceeded without the direction or permission of the creditors.
Well now that the creditors are satisfied, and their money locked away safely, what is the situation? The Administrators would probably have a few dollars in kitty and the lesser of our two major assets, not much to work with. Sell, re-capitalise or whatever.
Presumable, the Administrators are now working for the shareholders. If they are able to restructure and hand a business back to directors, what would it look like? I don't think shareholders would have much skin in the game, and I have no doubt that we soon would be invited to participate in a CR, something which we should have occurred prior to insolvency.
This is my assessment of the process so far. The directors failed in not choosing, for reasons we will never know, to CR raise prior to insolvency, forcing administration, and the creditors, to preserve their cash, finished us off. What do you think? J L.
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