Vol 20 (2023) - Issue 6

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Substantial Disposals by Administrators in the First Eight Weeks: When is the Purchaser a 'Connected Person'? – Part One, Overview and Checklist

Synopsis
Following the changes made in April 2021 by the Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021, if a substantial disposal is envisaged within the first eight weeks of an administration, the parties, in particular the administrator, need to check whether the proposed purchaser is or is not a 'connected person' with the company in administration. If the proposed purchaser is a connected person then the purchaser usually needs to provide a report from an 'independent' evaluator.
The relevant tests for being a connected person are set out in the legislation: para. 60A of Schedule B1 to the Insolvency Act 1986. However, the tests are rather complex and use many other concepts (which themselves can be tricky) from other parts of the legislation – such as 'associate', 'director', and 'officer'.