Q&A

What is an Evaluator's Report?

Evaluator's Reports were introduced in 2021 by The Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021 ('the Regulations') to provide an independent review of proposed sales to connected parties from a company in administration. Pursuant to the Regulations, an administrator is no longer able to make a substantial disposal of assets to connected parties without either an Evaluator's Report or prior approval from creditors.

Does it apply only to companies in administration?

Yes, the requirement for an Evaluator's Report does not apply to other forms of insolvency process.

Who is a connected party pursuant to the Regulations?

This list is not exhaustive, but includes individuals or companies connected to the company entering administration.  It may include directors, shadow directors, and de facto directors, as well as those connected to them, such as a spouse, ex-spouse, business partner, child, or sibling.  It may also include companies or businesses that are controlled by any of the above, including controlling shareholders and secured creditors.  For a full list you should consult the Regulations and associated legislation and take legal advice.  It is for the administrator to determine if a party is connected.

What is a pre-pack?

A pre-pack is a term applied to sales from administration where the transaction was negotiated and agreed in principle prior to the administrator being appointed, with a view to the sale being completed immediately after the administrator has been appointed.

Does the requirement for an Evaluator's Report apply only to pre-packs?

No. The Regulations stipulate that any substantial disposal to connected parties within 8 weeks of the administration can only be completed if creditors have given their prior approval to the disposal, of if an Evaluator's Report has been provided. Accordingly, if the administrator is appointed and subsequently begins the process of marketing the business and/or assets for sale, then the Regulations will still apply for disposals to connected parties provided the disposal completes within eight weeks of the administration.

Can anyone be an Evaluator?

No. An Evaluator must be someone who has the relevant knowledge and experience sufficient for the purposes of making the report, has professional indemnity insurance, and meets the requirements of independence as set out in the Regulations. The administrator must be satisfied that the Evaluator has sufficient knowledge and experience to provide the report.

Is the Evaluator a party to the transaction?

No. The Evaluator provides an opinion on the proposed disposal and is not a party to it. The parties to the transaction, such as the administrator and purchaser, are able to complete the sale even if the Evaluator is not satisfied with the terms of the disposal. In such circumstances, however, the administrator must provide their reasons for proceeding with the disposal.