
Free Business Review
Claim your Free Business Review to understand what options are available to you.
Require Immediate Support? Free Director Helpline: 0800 644 6080
Free Director Helpline: 0800 644 6080
Published:
Written by: Jonathan Munnery
If your business is experiencing extreme pressure from creditors as it is contingently insolvent, yet remains viable, this may be the best time to enter company administration. Company administration can give you the breathing space that you require to restructure company finances and revive the business.
60 Second Test Find Your Nearest Office
Company administration is a process that offers viable businesses the chance to deal with financial decline without the threat of enforced winding up. An eight‐week moratorium on creditor legal action commences on entering administration, and there are various potential outcomes.
These include a restructuring of the company’s debts to make it more streamlined and better able to move forward with confidence, sale as a going concern, and a sale of underlying business assets.
Don't Worry - There are thousands of other company directors going through the same process. No matter what position you are in and need looking for options, speak to a member of the Real Business Rescue team. It's Free & Confidential.
The team are available now - 0800 644 6080
Administration is only suitable under certain conditions, so what are the general criteria for entering the process? It’s only appropriate for larger companies that are:
When the company is insolvent
There are three different types of insolvency to consider, and the company’s financial position must be confirmed by a licensed insolvency practitioner (IP):
On insolvency, directors must change their focus to prioritise creditor interests. This is a statutory requirement, and includes ceasing trade to prevent further financial losses.
When there is extreme creditor pressure
If a winding‐up petition has already been made, or is expected imminently, directors may be able to place their company into administration to protect it from liquidation. In fact, the process provides a much‐needed ‘breathing space’ when a company is suffering relentless creditor pressure. For eight weeks, the administrator can develop a plan for the business that’s appropriate for its situation.
If the company is viable
Long‐term viability is a key criterion when considering administration as a potential option. If it’s believed the company’s financial decline can be halted and reversed, the time may be right to enter administration.
A common exit from the process involves formally restructuring the company’s debts within a Company Voluntary Arrangement, or CVA. This brings into force a new debt repayment structure designed to support the company’s recovery over several years, but other potential exits from the process also exist.
Sale as a ‘going concern’ or a ‘pre‐pack’ sale
Debt restructuring isn’t the only way forward when a company is in administration. Other common outcomes include a ‘pre‐pack’ sale of the company’s underlying assets to a third party or the existing directors ‐ this is called pre‐pack administration. If appropriate, however, the company may also be placed on the open market for sale as a ‘going concern.’
Liquidation
If the business cannot be rescued or sold, the only available avenue may be liquidation. Creditors’ Voluntary Liquidation, or CVL, allows the company to be closed down according to statutory requirements, and its directors may also become eligible to claim redundancy pay.
Creditors’ Voluntary Liquidation is preferable to compulsory liquidation as it protects creditors from further financial losses, and also minimises the likelihood of misconduct or wrongful trading allegations being made against the directors.
If your company is struggling with unmanageable debts, squeezed cash flow, or an uncertain future, you are far from alone. We speak to company directors just like you every single day, and we are here to give you the help and advice you need.
Call our team today on 0800 644 6080
Company administration must be conducted by a licensed IP, and it’s crucial to obtain professional insolvency advice at the earliest stage of financial decline. This opens up more options for restructure and recovery, and provides the company with a better chance of returning to profitability in the long‐term.
Real Business Rescue are insolvency specialists and can provide the early advice you need. Please get in touch with our partner‐led team to arrange a free same‐day consultation. We work from a wide network of offices throughout the UK.
All UK sectors are experiencing specific challenges at present, particularly in light of the Covid-19 pandemic. Find out how your sector is performing here.
Simply search your Limited Company Name or Company Number
We will also check if you’re eligible for Director Redundancy
We provide free confidential advice with absolutely no obligation.
Our expert and non-judgemental team are ready to assist directors and stakeholders today.
Claim your Free Business Review to understand what options are available to you.
Find your nearest office - we have more than 100 across the UK. Remote Video Meetings are also available.
Free, confidential, and trusted advice for company directors across the UK.