Understanding The Administration Process

Placing a company in administration is often a complex process, and it’s vital for every business owner to understand how it all works.

First off, an administrator is appointed to the company. This may be by:

• Any creditor

• The holder of a Qualifying Floating Charge (or QFC), such as the bank

• The company itself

If an administrator is appointed by a creditor (via court) or via a QFC, then the director(s) will have no say in which administrator is used. If the company or director(s) appoints an administrator themselves, then they are free to choose whoever they wish to conduct the procedure.

Before being appointed as an administrator, an insolvency practitioner must ensure that he/she will be able to save the company from dissolution, or achieve good results for the company’s creditors. If company survival is simply not possible, the administrator will look to sell the company assets by trading the company or ceasing trade immediately and then selling the assets.

A Pre-Pack Administration

A Pre-Pack Administration is when a buyer for the company is found prior to the business actually being placed in administration. The purpose of a Pre-Pack Administration is to guranatee that trade continues by moving contracts to the purchasing company (and also guaranteeing that employees are moved to the purchasing company too). In many instances, this is widely considered to be the best way to save the business as a going concern.

The media often refer to a Pre-Pack Administration as an "underhand sale"; a sale to a company run by the same directors. However, any sale during a Pre-Pack Administration is subject to regulations, which outline the bits of information that company creditors are entitled to know.

What Happens After The Administrator Is Appointed?

Once an administrator is appointed, he/she will have a number of duties to fulfil in order to successfully sell the company’s assets. First of all, the administrator must notify all company creditors that they’ve been appointed – and then must make an active effort to stay in touch with the creditors throughout the entire process. Every creditor needs to be fully informed about the company’s sale strategy, and it is the duty of the administrator to fill them in.

Administrators have a maximum of 8 weeks after being appointed to send creditors proposals for achieving the purpose of the administration. The report to creditors includes an account of circumstances giving rise to the administrator’s appointment, a statement of affairs, details of the disposal (sale) of assets already made, the basis of the administrators fees, the proposed exit route from administration. A creditors meeting may also be required and this must occur within 10 weeks of the administrator appointment where the proposals are discussed and the creditors have an opportunity to ask questions of the administrator. The administrator has one year to complete the entire administration process. The court can grant an extension if there are extenuating circumstances.

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Is An Administration Right For My Company?

Here at My Insolvency, we aim to give you the best possible advice as to which procedure will be best suited to your company’s individual circumstances. If your finances are all over the place and you're feeling completely lost, contact us and let us help you out.