Overview of Administration


If your company is being threatened by creditors, whether it is a landlord, HMRC, your Bank, Credit Card Company or anyone that you owe money to, and you fear that you could be taken to Court and put out of business, an administration order could protect your company from liquidation and dissolution.

If your company is or is likely to become unable to pay its debts then a Notice of Intention to appoint or Notice of Appointment can be filled at the court. The presentation of the notice has the effect of preventing creditors from enforcement action against your company (a Moratorium takes effect).

The Administrator is appointed by the Court.

The intended purpose of the Administration Order:

• Rescuing the Company as a Going Concern (i.e. Save companies from going into Liquidation) or

• At least provide a better prospect for creditors than a liquidation would (without first being in administration).

• Selling all of the assets in order to make a distribution to one or more secured or preferential creditors.

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Are You Eligible for Administration?

To be eligible for Administration:

• The business should be insolvent or contingently insolvent.

• Creditor pressure is present and there is a concern that the company could be taken to Court in the near future.

• Often creditors have already made threats to force the business into compulsory liquidation in order to recover what is owed to them.

If the company has very little assets and is also lacking in cash flow then a creditors' voluntary liquidation (CVL) is likely to be a more suitable solution.

Or if creditors are not yet threatening legal action, but you're concerned that they may start soon, then you may want to attempt a company voluntary arrangement (CVA) in order to resolve your issues.

To be absolutely sure of the route for your company, speak with one of our insolvency practitioners today. My Insolvency can give you the help you need.

Background

Objective of Administration under the Insolvency Act

• To rescue a company or partnership as a going concern

• To achieve a better position for creditors as a whole than would be achieved if the company or partnership was immediately wound up.

• Realising assets in order to make a distribution to one or more secured or preferential creditors

With prompt action on the part of the directors, the damages arising from insolvency can be restricted. The moment the directors identify the risks of insolvency action should be taken.

What are the advantages of Administration?

• Prevents the further decline of the Company’s financial position

• Limit the liability for Wrongful Trading (civil liability against the directors personally)

• Prevents hostile enforcement action by Distress, ROT and HP Creditors

• The Company can be restructured, giving the Administrator the opportunity to dispose of the non-profitable parts of the business.

• Saves the jobs of the employees

• Avoids bad publicity

• More attractive than a compulsory liquidation

Business recovery can take various forms and by taking proactive steps at an early stage the directors may remain in control of their company and trade their way out of trouble. Burying your head in the sand or merely leaving to chance are not business options a responsible director should consider. If you take too long then the business rescue may no longer prove a viable option for you and your business.

To be absolutely sure of the route for your company your first step should be to engage a corporate turnaround and restructuring specialist such as My Insolvency so speak with one of our licensed insolvency practitioners today. My Insolvency can give you the help in formulating a workable strategy for your business and provide you with the peace of mind you need.