The case of Worcester Warriors highlights administration process

Worcester Warriors, the Premiership rugby club, have been suspended from playing and will be put into administration after failing to meet a Rugby Football Union funding ultimatum.

The Department for Digital, Culture, Media and Sport, one of the main guarantors of a loan through Sport England, said it had agreed to the directors’ request to place the club into administration.

A statement added that it was “in order to give the club the best possible chance of survival, and to protect a significant taxpayer investment”.

What happens next to the club is unclear but it is hoped that a buyer can be found as soon as possible, with the club potentially able to resume matches if the suspension is lifted.

The Warriors are not the only Premiership club struggling financially, with fellow Midlands side Wasps announcing their intention to appoint administrators to “protect the club’s interests”.

The case of the Warriors highlights the administration process.  Administration is a procedure which allows for the reorganisation of a company or the realisation of its assets under the protection of a statutory moratorium, which prevents creditors from taking action to enforce their claims against the company during the administration process and so hamper the implementation of a strategy for the company’s rescue or asset realisation.

In the vast majority of cases, administration is used to reorganise or realise the assets of insolvent companies.  When a company enters administration, an insolvency practitioner is appointed as the company’s administrator.  The administrator takes over the control of the company’s business and assets from the company’s directors, in order to achieve one of the statutory purposes of administration.

When a company enters administration, it becomes subject to a statutory moratorium that prevents creditors enforcing their claims against the company.  Essentially, the statutory moratorium provides a company in administration with a “breathing space” during which the administrator can reorganise the company’s affairs or conduct an orderly realisation of the company’s assets, without pressure from creditors of the company.  The moratorium restricts the ability of third parties to enforce their rights against the company, without the prior consent of the administrator or the consent of the court.  It also prevents the commencement of alternative insolvency procedures in respect of the company.

If you are a director of a company which is potentially facing insolvency, we can provide focussed advice to you with the aim of assisting you and mitigating your potential personal exposure.  Likewise, if you are an insolvency practitioner and require legal assistance on any insolvency law issues, we regularly assist insolvency professionals too.

For further advice and assistance please contact our Business Services Team on 01604 828282 / 01908 660966 or email info@franklins-sols.co.uk