Applying for an Extension of the Administration Period – Do’s and Don’ts

Published byHilary Steer

3rd December 2024

On 21 November 2024, Lord Braid Published an Opinion in the Administration of PSL2021 Realisations Limited (formerly Peacocks Stores Limited) in relation to a Note to extend the Administrators’ term of office in terms of paragraph 76 of Schedule B1 to the Insolvency Act 1986.

Lord Braid neatly sets out the actions an Administrator ought to have taken relative to an application:

1. Notify creditors of the intention to apply to the court for an extension prior to making the application. The notice should include:
a. How long an extension is being sought
b. Why an extension is being sought i.e. what is there still to do in the Administration?
c. A specified period for creditors to object to the proposal of an extension

2. Apply in plenty of time
a. Para 78(4)(c) of schedule B1 to the Insolvency Act 1986 excludes the possibility of an application for an extension being considered after the date of expiry – even if the note was lodged before that date
b. An extension should not be viewed as a formality bound to be granted and the court must be afforded sufficient time to consider the application

3. Provide sufficient information in the application. The application to the court should include:
a. How long an extension is being sought
b. Why the extension is being sought i.e. what still needs done
c. Justification that the extension period sought is necessary i.e. that the Administrator is not seeking too much time
d. A note of any objections lodged by creditors (and the reasons why the court should disregard the objection if that is the case)
e. An explanation as to why the Administrator has been unable to complete the outstanding steps in the time already afforded

Lord Braid does not provide any particular guidance on how this notice to creditors is to be made, but does suggest that an obvious practical means would be through an online portal (if one is being used) and to notify any creditors not using the portal by letter.

Alternatively, Lord Braid suggests that, if it is known at the time of reporting that an extension will be required, to include the notice in the progress report. Additionally, he notes that it is unsatisfactory for progress reports to be a ‘copy and paste job’ and the courts will scrutinise more closely the reasons why certain incomplete tasks might be repeated over multiple progress reports.

Lord Braid then goes on to say that there is an element of “Parkinson’s Law” in operation to the effect that an Administrator will expand to fill the time allowed. Accordingly, he notes that the danger of extensions being too readily granted is that the Administrator is under little pressure to complete the Administration if he considers another extension will be granted without any problem.

This opinion makes it clear that Administrators cannot assume that an extension will be granted simply because the work is not yet complete. They will need to justify the need for an extension and provide a more transparent overview of where things stand both to creditors and to the court.