Administration is a procedure which can only be utilised by a licensed insolvency practitioner.
A licensed insolvency practitioner has a statutory obligation to perform his functions with the objectives of rescuing a company as a going concern, achieving a better a result for creditors as a whole than if the company had first gone into liquidation, or realising property to make a distribution to secured creditors.
There are a number ways which the objectives of Administration can be achieved and the Administrator will look at a number of scenarios before making a decision on how the Administration is going to be conducted.
Check out our explanatory video on Administration below:
When an insolvency practitioner is appointed as an Administrator, the director lose their powers and control to run the company.
The appointed Administrator takes over the charge of running the company and makes all the necessary decisions on how the company is to be operated with a legal obligation to act in the best interest of its creditors.
In this process, he advertises the business for sale whilst continuing to trade the business. Once a purchaser is found he then sells the shares or parts of the business.
If there are no purchasers for the business, then the administrator will close down the company, make all the necessary redundancies and sell the remaining assets
The Administration must follow the procedure set out in the insolvency legislation.
We will assist you with the preparation and application for Administration at each stage, including drafting notices, minutes and other documents where appropriate, but the ultimate responsibility remains with you.
The following main steps must take place in each appointment:
A quorate meeting of the Board of directors will have to approve the issue of notices required by statute to place the company into administration and confirm that we are instructed to assist with the formalities. We will provide standard minutes that include resolutions that, among other matters, will deal with our pre-appointment fees and appoint us to assist with the Administration appointment.
Notice of Intention to Appoint: Where the Company has a floating charge holder who is, or may be, entitled to appoint an Administrative Receiver or Administrator out of court, they must be given 5 business days’ notice of the intention to appoint an Administrator within statutory timescales.
Upon filing the notice of intention to appoint in Court the Company will obtain an interim moratorium giving it protection against creditor action.
It may also be necessary to give notice of intention to appoint an Administrator to other parties, such as the Company itself.
A formal notice of appointment has to be issued to the court.
After the appointment, the Administrator is required to issue and advertise a variety of notices for the attention of the Registrar of Companies, the Court, other statutory bodies such as HM Revenue and Customs and the members of the Company and creditors generally.
The Board will be required to complete a statement of truth to verify the accuracy of the contents of a statement of affairs on behalf of the Company.
We can assist you in preparing a draft statement of affairs from information that the Board provides, but it remains the Board’s statement and those who complete the statement of truth will be ultimately responsible for any false disclosure or omission.
As soon as reasonably practicable after the appointment, but in any event within 8 weeks, the Administrator will issue their proposals to the Registrar of Companies, Court and creditors, setting out how they intend to achieve the purpose of the Administration.
Within the first three months following his appointment, the Administrator is required to complete a confidential online report to the Secretary of State on the conduct of those who have been directors, or shadow directors, of the Company in the last 3 years. The information contained in the online report could result in the Secretary of State taking action to disqualify one or more of the directors, or shadow directors, from managing a Company for a period of between 2 and 15 years.
The Administrator may also seek a decision from the creditors when they issue the proposals, although this will only be necessary if there is a prospect of a distribution to unsecured creditors.
If such a decision is sought, the creditors will have the opportunity to modify the Administrator’s proposals, appoint a Committee to assist the Administrator and, if no Committee is appointed, fix the basis of the Administrator’s fees and disbursements and approve any pre-administration costs not already paid if they are to be paid from asset realisations in the Administration.
If a decision is not sought from the creditors, it will be for the secured and preferential creditors to fix the basis of the Administrator’s fees and approve pre-administration costs in accordance with the legislation.
The method used to exit from the Administration will depend on a number of factors and the most appropriate exit route will be considered by the duly appointed Administrator. It is possible that the most appropriate exit route may be through either compulsory or voluntary liquidation.
Possible outcome of an Administration
If the company can recover, part or whole of the business is rescued and jobs saved after a brief period of trading
The company continues to trade under the Administration umbrella for a brief period whilst any remaining profitable contracts are completed
If the company cannot recover, all assets are sold off in order to maximise realisations to pay secured and preferential creditors
Greater Return For Creditors: When a company enters into Administration, it offers the possibility of greater return for the company directors compared to liquidation
Allows Company Restructuring: Since with Administration, rescue of the business is of greater concern, it allows for company restructuring with experienced practitioners
Possibility Of Survival: Unlike Liquidation, which leads to winding up a company, with Administration there is a possibility for the company to survive and continue trading
Relief for Worried Directors: With Administration, a creditor can’t take any legal action against a company in Administration which gives a tremendous relief for worried directors
Loss of Control: When a Company enters into Administration, director lose its control to run the company.
Investigations into The Conduct of Company: When a company enters into Administration, the company’s affairs are scrutinised and all the actions of a director are reported which may lead to
Negative Publicity: As Administration is public, customers, creditors, employees are notified about this situation. This will lead to uncertainty with customers, employees and you will need to rebuild the trust to demonstrate the business can still provide the same service they are accustomed to or better.
Should you need help in business recovery or Administration, contact us on 0800 093 4604 or live chat with us. Alternatively, you can complete our enquiry form and one of our Administration Insolvency Practitioners will be in touch with you.
When a company cannot pay of its debts and there is a continuous pressure from creditors, administration can be a favourable alternative to compulsory liquidation.
Unlike Liquidation, which most likely results the end of the company, administration is the insolvency procedure which gives the administrator the time to devise a business rescue strategy.
Entering into the administration with the aid of a licensed practitioner stops any legal action or process against a company from proceeding
An Administrator is a licensed insolvency practitioner. An Administrator is appointed
by a court
by the holder of a qualifying floating charge holder
by the company or its directors
If your employer goes into liquidation or administration then your maternity pay will be paid by HM Revenue and Customs at the statutory level and not the level you were receiving from your employer.
The excess owed to you by your employer can be claimed from the company in liquidation although you may not be paid in full (if anything at all) and it make few months.
If you are having problem in getting paid for the statutory amounts, contact the liquidator of the company in liquidation or the HM Revenue and Customs national helpline.
In some cases, Administration can protect the Company from the threat of Liquidation. One important benefit to Administration, is the moratorium, which prevents creditors from taking legal action against the company without the consent of the Administrator.
The moratorium can be used to give the Company time to be saved or restructure.
In certain circumstances, Administration may even result in the Company being returned to the Directors, or can be followed by a CVA, which would result in the rescue of the Company.
In certain circumstances, Administration may be used to protect the value of assets before an eventual Liquidation.