What is company Administration?

An Administration is a very powerful Insolvency procedure for insolvent companies. It protects the company from its creditors and prevents them from applying to wind the company up during the administration.

Why would a business enter Administration?

Administration gives the company the breathing space in order for the Directors and the Insolvency Practitioner to formulate a plan to attempt to save some or all of the business. Usually, administration is used to help save employees from losing their jobs. It can also mean that the company doesn’t have to pay all its debts in full.

Does an administration guarantee the rescue of a company?

If the Administrator, who must be an Insolvency Practitioner, cannot rescue the business thou then a sale of the business as a whole or its assets may take place. The company may however still ultimately end up being liquidated.

How to enter your company into Administration

You must appoint a licensed Insolvency Practitioner. From the date of the appointment you must hand over all control of the company and its assets to the Administrator.  They then have eight weeks in which to formulate a proposal which will confirm how they intend to deal with the company for the benefit of the company’s creditors. The usual proposal put forward by an Administrator are;

• Sell the business assets under a Creditors Voluntary Liquidation to pay the creditors
• Keep trading the company under a Company Voluntary arrangement (CVA)
• Close the business as there is nothing to sell
• To sell the company as a ‘going concern’ to another entity ensuring the continuation of any contracts, orders and retaining the workforce.

Disadvantages of going into Administration 

• Directors lose control of the company
• Creditor awareness due to publicity could affect trading
• A creditor may have the ability to appoint their own Administrator