When a company goes into administration, time does not stop running against its creditors' claims for the purposes of the Limitation Act 1980. This is different to where a company goes into liquidation as time does then stop running. The effect there is that the claim stays live whereas in an administration, once the limitation period has expired, the claim is time-barred.

This was confirmed by the court in the matter of Leyland Printing Company Ltd and Leyprint Ltd. The company went into administration in May 2002, which was before the Enterprise Act 2002 came into force. By April 2010, all but one of the claims of the company's unsecured creditors had become time-barred under the Limitation Act 1980. At no time had the administrator formally acknowledged any of the creditors' claims, which would have the effect of restarting the limitation period (s29 Limitation Act 1980). This meant the time-barred creditors would receive nothing and any surplus in the administration would represent an unexpected windfall to the company's shareholders.

The administrator applied to court for directions as to how the creditors' claims should be treated. The court held that the administrator could not admit the statute-barred creditors' claims. They had never been acknowledged to restart time running and could not therefore be admitted.

Things to consider

Where limitation is an issue, creditors should consider either seeking an acknowledgment of the claim from the administrator (to start time running again) or seek permission from the court or administrator to issue proceedings (and then stay them). Although pre-Enterprise Act administrations will become increasingly rare, there is no authority yet stating that time will stop running under Enterprise Act administrations.