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Northern Ireland - Company Administration and Pre Pack Administration

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Updated: 20th June 2021

Understanding pre-pack administration in Northern Ireland

If you're concerned that creditors or HMRC may be on the verge of taking your company to Court, and you're interested in rescuing the business, then you may want to consider entering into a formal proceeding known as company administration. In this guide we'll discuss the steps involved in the process and how it can be used to protect a distressed Irish limited company from being put out of business.

If you don't feel like reading all of the information below and you need answers fast then feel free to call us on 0800 644 6080 or ask one of our experts online. With 100 offices stretching from Inverness down to Exeter, Real Business Rescue can offer unparalleled director advice across the UK. We always offer initial consultations at no charge and as licensed IPs we are legally obligated to provide the most accurate and actionable advice.

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What is Company Administration?

Administration in Northern Ireland is a formal insolvency procedure in which an insolvency practitioner is appointed to serve as the administrator (interim CEO) of your company. It is often presented as an alternative to winding up and compulsory liquidation because, even though some of the company's assets may need to be sold during administration, there is a chance that the business can be rescued and continue operating as a going concern.

The exact events of the administration will depend on several factors, including the goals and preferences of the company's directors, the amount of debt owed, and the likelihood of the business escaping insolvency. The administrator will be given control of the company and its assets and can use a variety of means to raise funds in order to repay preferential creditors and/or facilitate the approval of an arrangement.

Although administration can be used to protect a company from legal action and bring it out of insolvency, it can also be used by creditors as a way to wind up the business in the most efficient manner possible.

How Can A Company Enter Into Administration?

A company officially enters into administration once an administrator has been appointed. An administrator can be appointed in the following ways:

  • The directors of a business can pass a resolution and appoint an administrator to begin the process voluntarily.
  • A creditor who holds a floating charge can apply for an administration order from the Court and appoint an administrator of their choice.

  • The Court can appoint an administrator if they feel that administration would provide a better outcome for creditors than a typical compulsory liquidation.

What are the Main Advantages of Entering Into Company Administration Voluntarily?

  • A moratorium will protect the company from aggressive legal action. This postpones the threat of liquidation and insolvency long enough for the administrator to work towards a rescue.

  • Any pending winding up petitions against your company will be suspended or dismissed.

  • If an administrative receiver has already been appointed then the administrator can ask them to vacate office
  • During administration, the administrator will be able to propose informal and formal negotiations. In many cases a company voluntary arrangement (CVA) for Northern Ireland based companies can be successfully negotiated, thereby providing a second chance to repay debts through a viable payment plan that only requires a single monthly repayment based on how much your company can reasonably afford to contribute.

What Happens During Administration?

Upon appointment the administrator will issue a notice of the administration to all of your company's creditors and the Registrar of Companies. They will also publish a notice of appointment in the Belfast Gazette and at least one other newspaper that is distributed within the region of your company's principal place of business.

After issuing the appropriate notices, the administrator will typically begin the administration process by requesting a statement of affairs from your company's directors. The statement of affairs is simply a document that contains important records of the company's financial status, including information regarding income and expenditure, and the value/costs of all assets and liabilities.

Within 8 weeks of being appointed the administrator must make a statement that contains the plans and proposals for achieving the intended goal of the administration. These administrative proposals are then sent to the Registrar of Companies and all of your company's creditors (along with an invitation to the initial creditors' meeting). At this initial creditors' meeting, creditors will be given the opportunity to reject, approve, and/or request modifications to the administrator's proposals.

The duty of the administrator is to devise a feasible course of action that will provide the best outcome for all of  your company's creditors, get this plan approved at the creditors' meeting, and then carry it out in the most efficient and effective manner possible. The proposed plan may involve negotiating a CVA, selling all or some of the company's assets, seeking additional financing, and/or operating the business with the intention of using the income to repay creditors.

What Happens if the Business Can't Be Saved During Administration?

If the administrator is unable to rescue the business then the end result will be the liquidation of all assets followed by dissolution of the company - more information here on liquidation for companies in Northern Ireland. However, if the directors of your company are interested in preserving and transferring some of the company's assets before it goes out of business then it may be possible to achieve this by arranging a pre-packaged sale of assets during administration, also known as pre-pack administration.

During a pre-pack, one or more directors would be able to purchase some or all of the company's assets at fair market value using their own personal funds, provided it can be shown that this provides the best outcome for creditors and that no other preferable options exist. Click here to learn more about pre-pack administration.

If you're interested in initiating or avoiding company administration, or if you have curiosities about any matter related to corporate insolvency in Northern Ireland or the rest of the UK, feel free to send us your questions or call us on 0800 644 6080 for a free, no-obligation consultation. 

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