Special Administration Regime

There has been much discussion and publicity around the special administration regime.

In essence a special administration is an insolvency process for businesses that provide a statutory or critical public service or supply, or where there is a wider public interest in a bespoke insolvency procedure with a different purpose than an Insolvency Act administration.

A special administration is designed to address the unique challenges faced by certain types of regulated entities within specific industries. In certain industries the appointment of a special administrator is only available to be made by the Secretary of State.

The objective of a special administration is generally to achieve a better outcome for key stakeholders in particular customers and depositors than would be possible through a standard insolvency procedure. The objective of the particular special administration regime commonly involves ensuring the continuation of essential services or activities or preserving the entity’s business operations.

The regimes can also provide for insolvency practitioners to be required to focus on specific objectives. For example, in IBSAR, it may be to prioritise the return of clients assets as soon as reasonably practicable over seeking to rescue the investment firm as a going concern.

There has been a significant expansion of the sectors for which a special administration is available. Some examples of current SARs include, but are not limited to:

Investment Bank SAR (IBSAR): this was introduced following the global financial crisis and the insolvency of Lehman Brothers. This regime is designed to handle the failure of systematic financial institutions. There have been many IBSAR’s since the legislation was introduced including Beaufort Securities where PwC acted as special administrator
Energy Supply Companies SAR: designed to protect customers if a large energy supplier becomes insolvent which was used in the Bulb insolvency;
Postal Services SAR: designed to ensure that a universal postal service is provided in accordance with the standards set out in the universal postal service order;
Water Industry SAR: designed to protect customers from the risks associated with the insolvency of a water provider;
Payment and Electronic Money SAR: introduced in 2021 to provide a regime similar in nature as the IBSAR but designed to protect customers of a payment services provider or an electronic money institution.