If you're buying a business or assets from a company entering administration, you might be wondering whether you'll still need an Evaluator Report if the sale takes place after the administrator has been appointed.
The short answer is yes. A sale completed after the administrator's appointment can still require an Evaluator Report.
Under the Administration (Restrictions on Disposal etc. to Connected Persons) Regulations 2021 (ARR 2021), certain sales to connected persons during the first eight weeks of administration must meet specific requirements.
The key questions are:
Is the purchaser connected to the company?
Does the sale involve all or a substantial part of the company's business or assets?
Will the sale take place during the first eight weeks of administration?
If these conditions apply, the administrator can't complete the disposal unless the company's creditors have approved it through the statutory process or a qualifying independent Evaluator Report has been obtained and considered.
But what happens if the sale takes place later? And can an Evaluator Report be prepared before the company enters administration?
Let's look at how the timing rules work and what purchasers need to know.
Does the timing of the sale affect whether an Evaluator Report is needed?
Yes. Timing is an important part of the requirements under ARR 2021.
There are three situations to consider.
1. Before the administrator is appointed
A proposed connected-party sale may be negotiated before the company formally enters administration.
This is common in a pre-pack administration, where the terms of a sale are agreed in advance so the transaction can complete shortly after the administrator's appointment.
An Evaluator Report can also be prepared before the company enters administration.
In fact, the Insolvency Service's guidance recognises that obtaining the report in advance can help an urgent pre-pack sale proceed promptly after appointment.
However, the report must still meet the statutory requirements, and the administrator must receive and consider it before completing an in-scope disposal.
2. During the first eight weeks of administration
This is the period covered by the restrictions in ARR 2021.
Where an administrator proposes to make a substantial disposal of the company's business or assets to a connected person during this period, one of two conditions must be satisfied:
Creditor approval: The disposal must be approved by creditors in accordance with the statutory procedure.
An independent Evaluator Report: The connected purchaser must obtain a qualifying report that the administrator receives and considers before completing the disposal.
The eight-week period begins on the day the company enters administration.
It's important to confirm the exact statutory deadline with the administrator or legal adviser, particularly where completion is planned close to the end of that period.
3. After the first eight weeks of administration
If the disposal takes place after the initial eight-week period, the specific restriction imposed by ARR 2021 no longer applies.
This means an Evaluator Report isn't required under those Regulations solely because the purchaser is connected to the company.
However, that doesn't mean the sale is automatically unrestricted.
The administrator remains subject to their wider legal and professional duties, including acting in accordance with the statutory purpose of administration and considering the interests of creditors.
The administrator must also determine whether the proposed transaction and its timing are appropriate in the circumstances.
Why are Evaluator Reports often prepared before administration?
Pre-pack administration sales are frequently time-sensitive.
A business may be experiencing significant financial pressure, and delays could affect its value, employees, customers or ability to continue trading.
Preparing an Evaluator Report before the administrator's appointment can help avoid unnecessary delays when the transaction is ready to complete.
For example, a connected purchaser may already have:
Agreed the proposed purchase price.
Identified the assets being acquired.
Obtained funding for the purchase.
Provided relevant valuation information.
Agreed the principal sale terms with the proposed administrator.
The Evaluator can review the proposed transaction and supporting evidence before the company formally enters administration.
However, the Evaluator doesn't approve the sale or replace the administrator's commercial judgment.
The Evaluator must independently assess whether the consideration and grounds for the proposed disposal are reasonable in the circumstances.
The administrator remains responsible for deciding whether the sale should proceed.
Does every connected-party sale after appointment need an Evaluator Report?
No.
Just because a purchaser is connected to the company doesn't automatically mean an Evaluator Report is required.
The administrator must consider whether the proposed disposal falls within the scope of ARR 2021.
This includes establishing:
Whether the purchaser is a connected person.
Whether the transaction involves all or a substantial part of the company's business or assets.
Whether the disposal will take place during the first eight weeks of administration.
A series of transactions can also be treated as a substantial disposal under the Regulations.
For example, separating the sale of business assets into several transactions doesn't necessarily remove the transaction from the statutory requirements.
The administrator must consider the substance of the proposed disposal.
Where ARR 2021 applies, creditor approval remains an alternative to obtaining a qualifying Evaluator Report.
For further information, see our guides:
Do You Need an Evaluator Report for a Pre-Pack Administration?
Who Is a Connected Person in a Pre-Pack Administration Sale?
What must happen before the sale can complete?
Where the Evaluator Report route is being used, there are several important steps.
Step 1: The purchaser appoints an Evaluator
The connected purchaser must obtain a report from an individual who meets the statutory eligibility and independence requirements.
Step 2: The purchaser provides the transaction information
This will normally include details of the proposed assets, purchase price, payment arrangements, valuations and supporting evidence.
Step 3: The Evaluator prepares the report
The Evaluator must provide an independent opinion on whether the consideration and grounds for the proposed disposal are reasonable in the circumstances.
The report must explain the principal reasons for that opinion and summarise the evidence relied upon.
Step 4: The report is provided to the administrator
The administrator must receive and consider the report before completing the disposal.
Step 5: The administrator decides whether to proceed
The administrator must be satisfied that the report meets the statutory requirements.
A favourable report doesn't automatically authorise or guarantee completion.
Similarly, an unfavourable report doesn't necessarily prevent the sale from proceeding, although additional explanation and disclosure requirements apply where the administrator proceeds despite an adverse opinion.
The final decision remains with the administrator.
What if the sale terms change after the Evaluator Report is prepared?
This is particularly important where a report has been obtained before the administrator's appointment.
Under regulation 6 of ARR 2021, a qualifying report must satisfy the requirement that there have been no material changes since the report was made to:
The property being disposed of.
The terms of the proposed disposal.
The circumstances relating to the disposal.
For example, changes may include:
A revised purchase price.
Different assets being acquired.
Changes to the payment schedule.
New funding or security arrangements.
Other significant changes affecting the proposed transaction.
Not every minor amendment will necessarily be material.
However, if the changes are material, the existing report will no longer satisfy the statutory requirements for the revised disposal.
Where the Evaluator Report route is being used, a further qualifying report will therefore be needed.
It's important to keep the Evaluator and proposed administrator informed as the transaction progresses.
Can you avoid an Evaluator Report by waiting eight weeks?
A connected-party disposal completed after the first eight weeks of administration falls outside the specific restrictions imposed by ARR 2021.
However, delaying a sale simply to move beyond that period isn't necessarily commercially practical or appropriate.
The administrator must consider the wider circumstances and their statutory responsibilities.
For example, delaying a sale could affect:
The value of the business or its assets.
The cost of continuing to trade.
The availability of funding.
Employees and customers.
The likelihood of achieving the statutory purpose of administration.
The potential outcome for creditors.
In some circumstances, completing a sale promptly may be important to preserving the value of the business.
The decision about whether and when to sell rests with the administrator, not the connected purchaser.
Where a delayed sale is being considered, the administrator and their legal advisers should assess the implications and ensure the proposed approach complies with the applicable insolvency requirements.
What information should you prepare for an Evaluator Report?
If a connected-party sale is expected to complete shortly after the administrator's appointment, preparing the relevant information early can help the process run smoothly.
We'd normally recommend having the following information available:
Proposed dates: The expected administration appointment date and intended sale completion date.
Purchaser details: The identity of the purchaser and their connection to the company.
Assets being acquired: Details of the business or assets included in the proposed transaction.
Purchase price and payment terms: Including any deferred consideration, funding or security arrangements.
Valuation evidence: Relevant business and asset valuations, marketing information and details of alternative offers.
Transaction background: An explanation of the proposed sale and any important commercial deadlines.
Professional advisers: Contact details for the proposed administrator and other advisers involved.
The Evaluator may request additional information depending on the circumstances.
Our guide, What Information Is Needed for an Evaluator Report?, explains the wider documentation typically required.
Frequently asked questions
Can an Evaluator Report be completed before administration begins?
Yes.
An Evaluator Report can be obtained before the administrator is appointed.
However, where the report route is required, the appointed administrator must receive and consider the qualifying report before completing the disposal.
The report must also remain relevant to the transaction being completed.
Does every sale to a connected person require an Evaluator Report?
No.
ARR 2021 applies to substantial disposals to connected persons during the first eight weeks of administration.
Even where the Regulations apply, creditor approval through the statutory process is an alternative to obtaining a qualifying Evaluator Report.
Can the sale complete first and the Evaluator Report follow?
No, not where the administrator is relying on the qualifying-report route for an in-scope disposal.
The report must be obtained, provided to the administrator and considered before the sale completes.
Obtaining a report afterwards doesn't retrospectively satisfy that requirement.
Is an Evaluator Report required after the first eight weeks of administration?
Not under the specific restrictions in ARR 2021.
However, the administrator's wider legal and professional duties continue to apply.
Does a favourable Evaluator Report guarantee the sale will proceed?
No.
The Evaluator provides an independent opinion about the proposed disposal.
The administrator must consider that opinion but remains responsible for deciding whether the transaction should proceed.
Speak to Admin Eval about your proposed sale
If you're considering purchasing a business or assets through a connected-party pre-pack administration, it's important to understand the timing requirements from the outset.
At Admin Eval, we specialise in providing independent Evaluator Reports for connected-party administration sales.
We understand that these transactions are often urgent and that purchasers may be unfamiliar with the information and documentation required.
Our approach is practical, responsive and commercially focused, while maintaining the independence required by ARR 2021.
By involving us early, we can explain the evaluation process, identify the information needed and help you prepare for the proposed timetable.
If your connected-party sale is expected to complete shortly after the administrator's appointment, contact Admin Eval to discuss your circumstances.
Visit our Evaluator Report Services page or contact us to find out more.
