A company administration process can be quick and simple or long and complicated, depending on the appointed administrator and the status of the insolvent company. The aim of the procedure is to act in the best interest of the company’s creditors by leveraging assets and transactions with the primary intention of repaying debts. The company may be sold altogether, some of its assets may be separated and sold to a third-party, or the administrator may decide to continue trading as usual and use the proceeds to make repayments. Generally, the administrator will do whatever is necessary to uphold their statuary duty of acting in the interest of creditors.
We explain what business rescue options are available to you as the business owner, and it is you as the director who stays in control and decides what route to take. It makes no sense for our client directors to feel pressured into something that they believe does not favour them.
Company directors can choose to appoint an administrator on behalf of the company in order to safeguard their company from creditor pressures, or the holder of a floating charge can forcefully appoint an administrator over a company if it fails to uphold the conditions of a debenture agreement. After being appointed the administrator has a period of 8 weeks to send out formal administrative proposals to all creditors, during which time a creditors’ meeting must also be held. By law the administrator must be a licensed insolvency practitioner, and IPs are also obligated to examine all options in search of a more suitable course than administration before proceeding. For example, if the company has poor cashflow, few assets, and a dim chance of recovery, then the insolvency practitioner would probably recommend a creditors voluntary liquidation instead.
Once the administration begins, the newly appointed administrator will request that one or more of the company’s former or current directors or officers provide a detailed statement of company affairs. This document will simply detail the assets and liabilities of the business, including any assets that are subject to fixed or floating charges. The administrator must have a copy of the statement of affairs to attach to their proposal within the aforementioned 8-week time period. Once the proposals have been sent out to creditors, a copy of them will also be stored with the registrar of companies on the company’s public file. Sent along with the administrator’s proposals will be an invitation to the creditor’s meeting, during which floating charge holders will announce whether they accept the proposals.
A formal creditors’ meeting must be held within 10 weeks of entering administration, and each creditor must be given at least 14 days notice; these time constraints may be extended by the Court or creditors in some cases. It does not have to be a physical meeting – the matters can be handled via correspondence between the creditors and the administrator. However, if more than 10% of the creditors request a physical meeting then it must be held. The creditors can also choose to form a creditors’ committee of 3 to 5 people to represent the company’s creditors as a whole. From the creditors’ meeting on the administrator is required to send an administrative progress report to the creditors, the Court, and the registrar of companies at least once every six months until the company administration procedure ceases.
Real Business Rescue can often provide viable alternatives to the somewhat lengthy and stressful company administration process procedure. If you are at risk of being placed in administration by a creditor or would like to explore this option for a complete turnaround, give us a call today. We are the insolvency experts the UK has learned to rely on. With 55 offices across the UK, you’re never far away from expert and confidential advice.
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