Administration
Administration is a formal insolvency procedure where company directors acknowledge insolvency and appoint an Insolvency Practitioner (IP) to restructure the business, aiming to preserve it in some capacity. When a company enters administration, it gains immediate protection from creditors and legal actions, with a moratorium that prevents creditors from pursuing debt recovery.
This process buys the company time to develop and execute a strategy. The IP evaluates the business and, if viable, implements a recovery plan to keep the company operational. If not, the company may be refinanced, sold, or liquidated.
Administration can be initiated by the company, its directors, or creditors. During this period, the company can continue trading while a plan is devised to achieve one of three objectives:
Administration is advantageous because it can be implemented quickly (sometimes within hours), halts creditor actions, and allows an IP to devise a plan to save viable businesses.
Maintanance
Maintain the business as a going concern.
Maximize Returns
Maximize returns for creditors compared to other insolvency options (e.g., liquidation).
Creditors
Sell assets to repay secured creditors (e.g., banks) or preferential creditors (e.g., employees owed money).
Exiting Administration
A company must exit administration through one of the following methods:
- Refinance
- Company Voluntary Arrangement (CVA)
- Liquidation
- Share Sale
- Asset Sale
- Strike Off
- Pre-Pack Sale
Securing new working capital to continue operations.
Repaying a portion of the debt, with the remaining balance written off, and control returning to the directors.
If the IP deems the company unviable, assets are sold and proceeds distributed to creditors.
Selling company shares to a third party to maintain operations.
Selling company assets and distributing proceeds to creditors.
Closing the company by removing it from the Registrar of Companies.
Selling assets immediately after placing the company into administration.
Pre-Pack Administration
In a pre-pack, the company is placed into administration, and assets are immediately sold to a third party, including shareholders or directors of the insolvent company. The IP ensures the best price for assets by conducting pre-sale work before the administrator’s appointment. Consulting major creditors, although not required, shows good practice and prevents future disputes. Pre-packs are beneficial when the business is not viable on the open market, such as when a key director is essential to its operation.
FAQ's
It can take as little as a few hours.
A court order that stops creditors from taking action against the company, placing the IP (Administrator) in charge.
Yes, but you must pay a fair value determined by the IP.
Secured banks must be consulted and agree to the plan. They can ultimately stop it if they choose.
Costs vary depending on the case's complexity, starting from £5,000 upwards.
They can, but there are no guarantees. Viable businesses dragged down by historic debts are often saved.
Typically 12 months, but it can be extended to 18 months.
The Administrator, who must be a licensed insolvency practitioner (IP). Directors assist in the day-to-day running under the IP's supervision.
Directors usually continue running the company under the Administrator’s supervision, though the Administrator has ultimate authority.
Creditors, shareholders, secured creditors, and company directors.
You remain liable. After the creditor is paid from the company, they may pursue you for any shortfall. We can assist in addressing this.
