Administration

business, idea, strategy

What is it?

Administration is a formal procedure in which you appoint an insolvency practitioner to act as the administrator of an insolvent company with a goal of bringing about some form of recovery, generally through a sale or trading. Administration can happen as quickly as 3 days, so sometimes a necessary route for companies experiencing significant creditor / financial pressure.

As at the date of appointment, unsecured creditors are unable to take further action against your company without permission of the Administrator, this includes retention of title claims, legal proceedings etc. The appointment effectively creates a ‘bubble’ of protection around the company.

what are the options for an Administrator?

  • Negotiate a CVA so enable the company to keep trading 
  • Sell your business as a ‘going concern’ i.e to another company enabling the business to carry on trading
  • Sell the assets then follow with a CVL and pay creditors from funds raised, and then close the company
  • Close your company if there are no items to sell.

The two types...

PRE-PACK / SALE

The Directors or the potential Administrator may find a buyer for whole or part of the business prior to your company going into formal Administration. For companies with viable trading businesses, that have incurred significant debts which obstructs your company being sold as a going concern, this can be a proactive option.

TRADING ADMINISTRATION

For companies with ongoing responsibilities / contracts it is sometimes necessary for the Administrator to trade the business. In certain situations, this can return your company back to a solvent position, whilst some areas/assets of the business are potentially sold or closed. Such companies include care homes, schools etc.

What does an Administrator do?

The administrator will publish the appointment to creditors and Companies House. The administrator will try and stop the company being immediately liquidated through trading, a sale or sometimes a CVA (see later) otherwise they will try and pay as much of your company’s debts as possible through a sale of the assets.

Within 8 weeks the administrator will write a statement of proposals explaining the course of action which is also published accordingly to creditors, employees and Companies House. In certain circumstances these plans need to be voted on and approved by creditors.

Directors’ responsibilities remain on administration, but their control ceases. The administrator controls the entire company’s assets and trading. This includes (but is not limited to) renegotiating contracts, making employees redundant and controlling bank accounts.

The Administrators fees are paid by your company, however if there are not enough funds in the case, sometimes a personal guarantee from the directors is required.

The Administration automatically terminates after one year, however the administrator could apply for an extension if deemed necessary. If a CVA is agreed with creditors prior to then it can terminate even earlier.