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Voluntary Company Administration: Why Directors Would Choose to Enter into Administration?

Company administration can bring about positive changes for your business when it is struggling with debt, including rescue, restructure, and sale as a going concern. The process begins with an eight-week moratorium period that halts creditor action, and allows a breathing space to formulate a plan.

An initial downside of the process is loss of control over the company as a director, and professional fees can also be a dissuasive element, so why would directors voluntarily place their company into administration?

Why enter company administration voluntarily?

When a creditor successfully petitions to close down your business there are no professional fees to pay, and it may appear a quick and easy route to business closure, especially if there is no chance of its survival.

Enforced closure does, however, involve a stringent investigation by the Insolvency Service into the circumstances behind the company’s failure and whether director actions contributed to or caused the current financial situation.

This is why entering company administration on a voluntary basis is the better choice even if you feel there is no hope for the company, as compulsory liquidation is rarely the best option.

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Professional support and advice

Seeking professional insolvency help at the earliest opportunity offers the best chance of survival, which is where our team of experts at Real Business Rescue can help. Corporate insolvency is a complex issue, and as a director you must fulfil your statutory duties and obligations.

Falling foul of UK insolvency laws is a serious matter. It can result in personal liability for company debts, disqualification as a director, and even criminal proceedings in the most serious cases.

Is your company eligible for voluntary administration?

If your company’s cash flow is relatively predictable and it owns assets of value, company administration may be the best route out of financial difficulty.

  • The value of its assets can be leveraged to provide a cash lump sum to repay debt
  • Regular cash inflows may persuade creditors to accept the terms of a voluntary arrangement, and improve the general liquidity of your business

Once the terms and conditions proposed by the administrator are accepted, you can also regain control of the company with a view to trading your way out of difficulty.

How to enter voluntary company administration

The company can appoint an administrator without a court order, but floating charge holders must be given five days’ notice and contacted to discuss potential aims and outcomes.

Initially, you need to contact a licensed insolvency practitioner. Real Business Rescue offer free same-day consultations to determine your best options and provide reliable professional guidance.

The benefits of placing your company into voluntary administration include:

  • The potential for a range of positive outcomes, including a Company Voluntary Arrangement (CVA), restructuring and streamlining of your organisation, and sale of the underlying business assets
  • Ceasing of creditor action
Real Business Rescue can help you steer your company away from liquidation through defined rescue and restructuring options. Please contact one of our partner-led team – we operate an extensive network of offices throughout the UK so you’re never far away from professional support. With 75 offices across the UK, you’re never far away from expert and confidential advice.