Company Administration is an Insolvency rescue process that is designed to assist viable companies that are struggling.
It works by providing a legal moratorium preventing creditor action or duress.
If your company is experiencing cash flow difficulties, and is being threatened by legal action from a creditor or the Crown, which may, for example, be in the form of a winding up petition, seeking prompt advice from one of our expert Insolvency Practitioners could save the business and enhance its options.
Administration – key points:
Administration is a process normally utilised where:
- The company is under or will shortly be under duress/ legal execution from its creditors
- The company is experiencing cash flow pressures/ difficulties, which may be acute, and are hampering its ability to continue to trade the company and meet its financial obligations
- The company needs the protection afforded to it by a statutory moratorium to protect its goodwill and its assets
- The company needs to complete a project or its work in progress to secure payment of a book debt
- The company’s business and its assets can be sold as a going concern where the current entity is insolvent
- Avoids insolvent Liquidation proceedings being commenced that destroy value for all parties
Administration is a positive rescue process that enables the business, in whole or part, to be saved for the benefit of all stakeholders, therefore preserving value, as the Administrator commences marketing the company’s business or its assets after their appointment.
Although Administration and Pre-Pack Administration are subject to the same statutory regulations, the Pre-Pack process differs in one key area – in that the sale of the business and its assets is negotiated before the appointment of Administrators, but is concluded immediately thereon, or shortly after appointment. However recent changes to legislation, that came into effect from the 30th of April 2021, have been implemented to further protect the interests of creditors by restricting certain sales by Administrators to connected parties within eight weeks of the commencement of the Administration. The Pre – Pack sale can still proceed as long as certain criteria are met. There is now a requirement that either a qualifying report on the proposed transaction is undertaken by an independent evaluator or alternatively consent to the transaction is received by the creditors. The Administrator will be required to seek approval by agreement to the statement of proposals issued within eight weeks of the Administrators appointment.
Watch our video below where Partner and licensed Insolvency Practitioner Michael Roome explains more about administrations. This video is part of our wider Dealing with Company Debt video series, which can be viewed on our YouTube channel.
Dean Nelson, Nicholas Lee, Andrew Stevens and Michael Roome are all licensed in the United Kingdom to act as insolvency practitioners by the Institute of Chartered Accountants in England and Wales. They are bound by the insolvency code of ethics, which can be found here.
When acting as receivers, administrative receivers or administrators, they act as agents only, without personal liability, and when acting as administrators, the affairs, business and property of the company are being managed by them.