Going into Administration: What Going into Administration Means and How Long the Process Lasts

When a business goes into administration, a licensed insolvency practitioner will be appointed as the administrator who will manage the business and act in the best interest of creditors.

Going into administration can be an intimidating process, especially if you’re not familiar with the terminology and procedures involved. Although an administration could end up providing a positive outcome in the long-term, it could also mark the beginning of the end of your business, depending on the actions taken by the appointed administrator. Regardless of who appoints the administrator, they are required to act in the best interest of the insolvent company’s creditors as a whole. If you’re concerned about what is going to happen when your company goes into administration, or would simply like to learn more about the subject, consider the following information:

What Does Going Into Administration Mean?

Going into administration effectively means your company is being taken under the management of a court appointed administrator – who must be a licensed insolvency practitioner (IP) - appointed by the courts, your creditors, or your company directors. If your company is being petitioned through the court it may still be possible to request a Court Order to go into administration, however a 5-day notice will need to be given to all floating charge holders before such an order will be granted. Most experts recommend some form of rescue procedure as this could allow the company enough time to repay outstanding debts without being pressurised by creditors.

Some companies make the mistake of failing to file a return because they haven't the money to pay the amount due. This is where HMRC will step in and 'estimate' an amount they assume you owe and they will then base a surcharge on that amount.

Can You Stop your Company From Going Into Administration?

Once an administrator has been appointed there is little that can be done to reverse the process. However, if action is taken early it may be possible to substitute a conventional administration with a pre-pack administration, which could allow the company directors to form a  new company or another interested party to purchase the assets of the old one and continue operating.  

Knowing when a company is insolvent and immediately taking appropriate measures is the only way to avoid your company from going into administration. In cases where liquidation or receivership seems imminent, by approaching an insolvency practitioner as soon as possible will provide for the least detrimental outcome for the company.

How Long Does Going into Administration Take?

The process of administration can last anywhere from a few weeks to up to year or more, depending on the circumstances. However, the administrator is always obligated to perform all duties as soon as possible, so speedy administrations are more common than slow, drawn out ones. Administrators have a maximum of 8 weeks to send out their administrative proposals (their plans for the company) to creditors. These proposals typically include all of the details about events that led up to the administration, how the administrator plans on achieving the goals of administration, and the most likely anticipated outcome.

The use of a company administration process has to be justified to number of bodies and it must be able to demonstrate at least that it will rescue the company as a going concern and provide a better return to its creditors than other procedures.

If you need help with any issues related to company administration, please feel free to contact us today on 0800 644 6080. We can accurately assess your situation during a free consultation and aid in the development of a suitable course of action. 

With 75 offices stretching from Inverness down to Exeter, Real Business Rescue can offer unparalleled director advice across the UK.