Administration is an insolvency process in which an administrator is appointed to take control of the affairs of an insolvent company. It is one of the options available to insolvent companies that have a potentially viable future.
This process protects limited companies and partnerships from legal action being taken against them, without approval from the courts or the administrator.
How do I start the administrative process?
To begin with, a licensed insolvency practitioner is appointed as administrator of the company. This appointment may be by:
- Any creditor
- The holder of a Qualifying Floating Charge (or QFC), such as the Bank
- The company itself
Before stepping in as an administrator, insolvency practitioners must ensure that they will be able to rescue the company as a going concern, or achieve a better result for the company’s creditors than the business being wound up.
If company survival is simply not possible, the administrator will look to sell the company’s assets in order to make a distribution to one or more secured or preferential creditors.
What is pre-pack administration?
Pre-pack administration is when a buyer for the company is found prior to the business being placed in administration. A pre-pack of a business can be anyone.
The purpose of pre-pack administration is to guarantee that trade continues by moving contracts and employees to the purchasing company. In many cases, this is considered the best way to save the business as a going concern.
While anyone can potentially acquire a business through a pre-pack, existing management teams or directors often have a significant advantage. They are usually best placed to acquire the business through this process as they can move smoothly through the due diligence process. Any new interested party would need to get under the skin of the business to understand potential pitfalls (caveat emptor).
Is administration right for my company?
Whilst administration is a powerful tool that can be utilised to save a company, whether it is the best option for your company will ultimately depend on its circumstances. The key to any insolvency process is to engage with a professional advisory service at the earliest stage possible, so you can take full advantage of all the options open to you.
At My Insolvency, we pride ourselves on giving you honest advice and will always provide you with the options that are best suited to your company’s specific circumstances. If you would like to know more about administration and whether it is right for you, speak to one of our specialist team on 0800 009 6106 or email hello@myinsolvency.co.uk. We’re happy to help.
