ADMINISTRATION IN DETAIL
Administration should achieve one of three statutory objectives. These are:
- To rescue the company as a going concern (which means placing the business in short term protection until it can be handed back to the directors)
- To achieve a better result than the company being wound up (better than the business just going into liquidation first)
- To realise security to pay off preferential or secured creditors (the methods the banks use to appoint an administrator)
- One of the most useful aspects of Administration is that it’s very fast to get into and can be done without notifying creditors or shareholders. Once in Administration, the business is protected.
It is then up to the appointed insolvency practitioner (usually with the help and input of the directors) to decide what to do next. In no particular order, this may be one or more of the following:
- Reduce the staff head count and close any unprofitable branches or divisions
- Keep trading to finish any incomplete work to maximise value
- Try to sell all or part of the business to a new owner
- Sell assets and stock to realise funds to pay creditors
Within eight weeks of the date of the Administration order, the administrator will write to all creditors and set out their proposals (in a written report). They may then call a meeting of creditors within two weeks of that report to discuss the proposals and vote on the outcome.
The administrator has to call a meeting if more than 10% of creditors (by value) request one. The outcome of the meeting may be; carry on realising assets, move to liquidation or a company voluntary arrangement, dissolution or even a return to the directors if the business is now solvent.
“WHEN IN ADMINISTRATION, NO LEGAL ACTION CAN BE TAKEN AGAINST THE BUSINESS OR ASSETS REMOVED WITHOUT THE COURTS APPROVAL OR THAT OF THE INSOLVENCY PRACTITIONER APPOINTED AS ADMINISTRATOR TO OVERSEE THE BUSINESS.”
A WORD OF ADVICE
Administration is a very fast way of protecting a business in trouble. The application to appoint an administrator can be made by:
- The directors
- The company itself
- A bank or lender with a floating charge (also known as a debenture)
Licensed Insolvency Practitioner at Neville & Co.
Lisa is a licensed Insolvency Practitioner. She has been with Neville & Co since 2002 and has built up a wealth of experience in advising businesses and individuals in that time. She passed her insolvency license exams in 2008 and has been taking insolvency appointments since then.
She covers the South West area from Exeter to Penzance and also manages the office in Plymouth.