A guide to Administration
An Administration, is a legal process that can be quick and simple or long and complicated dependent upon the financial status of the insolvent company. The company will need to exit administration at some point whether that be via the rescue of the company as a going concern or exit of the Administration process. There are three statutory purposes of an Administration
Types Statutory Purposes of Administration;
Rescue the Company as a going concern
Achieving a better result for the creditors as a whole than would be likely in Winding up
Realising property to make a distribution to one or more secured creditors.
Administration and fees involved
An Administration (often referred to as an “Admin” and sometimes mistakenly referred to as a receivership) is the trading/turnaround or winding down of an insolvent company. Fees in Administrations can vary drastically depending upon what is involved in the case, whether it is a “trading Administration” which is where the Administrator and their staff trade the business for a period in order to achieve one of the objectives, this is labour intensive as opposed to a cheaper Administration where the company ceased to trade immediately upon the Administrators appointment. The fees of an Administration can vary from drastically with the majority being £10,000 to £100,000 however some of the larger jobs of national organisations can be significantly more.
How Administration works
The Administration is managed and overseen by the Administrator(s) whom must be a qualified and licenced Insolvency Practitioner.
There are three possible routes into Administration:
· Appointment by the Company or Director(s)
· Appointment by the Qualifying Floating Charge Holder
· Appointment by Application to the Court
Following the above a licensed Insolvency Practitioner is appointed as the Administrator to the Company.
The Insolvency Practitioner must give notice and advertise their appointment as well as notify Companies House and the creditors as well as serve notice on anyone else applicable as part of these initial notices all employees where applicable will receive formal notice of redundancy.
A request must be made to the directors to produce a Statement of affairs which is, in essence, a closing balance sheet and must be provided back to the Administrator within 11 days of the request and the Administrator should register this with Companies House.
Once the above formalities are completed, the Administrator must form a strategy for achieving the objective for the Administration, this is likely to have already been prepared pre appointment and it is a case of implementing the strategy subject to any significant changes in circumstances since the date the strategy was agreed.
An Administration lasts 12 months unless creditor or Court approval is received in order to extend the Administration period.
Advantages of Administration
can rescue the business as a going concern
employees jobs can be saved
Disadvantages of Administration
can be costly
very labour intensive
Alternatives to Administration
Is Administration the solution for you?
Our team of certified insolvency practitioners are here to help offer friendly advice to anyone unsure about their recovery options. It can be daunting for anyone in financial difficulty, that’s why our team are happy to talk through your options and help find the most suitable recovery solution for your situation. Contact us today on 01482 427175 or email us at info@westgates.uk.