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What Is Company Administration?


What is the process of company administration?

Company administration is a formal insolvency process designed to rescue viable elements of a struggling business, or else increase returns for outstanding creditors prior to it being dissolved. An insolvency practitioner will be appointed as part of the process, and they will assume control of the company whilst it remains in administration.

If your company is being threatened by creditors (such as a landlord, HMRC, your bank, or suppliers) and you fear that you could be taken to Court and put out of business, then continue reading to find out how administration could protect your company from closure.

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When Should a Company Enter Administration?

Before we tell you more about the process you should consider the following points to make sure it is appropriate for your company to enter into administration:

  1. The business should be insolvent or contingently insolvent, yet should have a significant amount of assets and/or value. Cash flow and profitability should be reasonably predictable.
  2. 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 by way of a winding up petition in order to recover what is owed to them.
  3. If the company has very little in the way of assets and is also dealing with increasingly squeezed cash flow then a Creditors' Voluntary Liquidation (CVL) may be a more suitable solution if the company is not likely to be viable in the long-term. If you believe your company has a reasonable chance of long-term success despite its current problems, a Company Voluntary Arrangement (CVA) could allow you to negotiate terms with your creditors and improve your cash flow position.

Corporate Restructuring Options

When a company is in difficulty, sometimes a process of financial and/or operational restructuring is needed. From CVAs through to Administration, there are a range of rescue and recovery options to help you get back on track.
Learn more about restructuring by calling our team -  0800 644 6080

What are the Advantages and Disadvantages of Administration?

Advantages of company administration:

  • Any legal actions being taken by creditors are immediately stayed, which means your company would be protected from the possibility of compulsory liquidation or any other negative legal action during the administration. This is done by way of a moratorium.
  • Puts the company in the hands of a licensed insolvency practitioner who will assume control for running the business while it is administration. This ensures that all actions taken during administration are carried out with the interest of the company's creditors in mind.
  • Keeps the financial position of the creditors from worsening.
  • The administrator is given time to communicate a clear picture of the company's finances to its creditors and outline the ways in which the administrator intends to conduct the administration and how the administrator intends to realise funds for creditors.
  • If a pre-pack is arranged then the continuity of the business can be protected.
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Disadvantages of administration:

    • During administration the company's directors are no longer in control of the affairs of the company.
    • The administration becomes a matter of public knowledge because correspondence with all creditors and clients must include a note that specifies the company is "in administration" next to the company name. For example, your company name printed on your invoices would have to appear as “Example Company Ltd. (In Administration).” Furthermore, the administrator is required to notify all creditors and employees that the business is under administration.
    • The bank or one of your creditors may have the right to appoint their own administrator.
    • Given the fact that the cost of administration can be quite excessive we usually only recommend it for companies that have good cash flow but are being threatened by aggressive creditor action.
    • If a Pre-Pack administration is carried out then TUPE regulations will apply, which means you'll have to transfer the employees and their contracts over to the “newco.” This can create a problem if the budget of the “new company” cannot afford to cover the payroll of the old company.

Who Has the Ability to Appoint an Administrator?

The directors of a company can elect to voluntarily enter into administration with the assistance of a licensed insolvency practitioner. Alternatively, the company can be put into administration by the holder of a floating charge under a debenture granted after 15th September 2003.

If the charge is held on a debenture that was granted before that date then they would be able to put your company into administrative receivership. Keep in mind that even if the directors of your company are the ones who initiate the administration it is possible for the bank, or another holder of a floating charge, to appoint their own administrator at their discretion.

Need to speak to someone?

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

How long can a company be in administration?

A company cannot remain in administration forever; sooner or later it will have to exit administration whether that is by way of a sale to a connected or unconnected party, entry into an alternative insolvency process such as a CVA, or a continuation of trade.

The administrator must submit their proposals to creditors within 8 weeks of the commencement of administration. After submitting their proposals and having them approved the administrator can take up to several months to carry out the administration as planned. Overall, an administration is not intended to last any longer than 12 months, but this time limit can be extended by the Court, or through the consent of the company's creditors. It can take 1-2 weeks to organise a pre pack administration.

Our licensed insolvency practitioners are experienced in all matters related to company administration. For free advice email us or call us today 0808 253 3826 and we’ll help you formulate a plan to get back on track. Real Business Rescue provide director advice online, over the phone, or in-person at one of our 100 UK offices or a place of your convenience.

Frequently Asked Questions about Company Administrations

Company Administration

How long does the administration process take?

What happens to staff when a company goes into administration?

Differences between admin and a CVA?

Is admin only for big companies?

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