Limited Companies
Company Administration
A formal insolvency procedure that can provide protection from creditor action while a company’s future is assessed.
Overview
What is Company Administration?
Administration is a formal insolvency procedure designed to provide a company with protection from creditor action while its financial position and future are assessed.
A licensed insolvency practitioner is appointed as administrator and takes control of the company’s affairs. Their role is to pursue the statutory purpose of administration.
How does the process work?
Although every administration is different, the process will generally involve the following stages:
01
Reviewing the company’s financial position
The company’s financial circumstances are assessed, including its assets, liabilities, creditor position, cash flow and future prospects. This helps establish whether administration may be an appropriate route.
02
Considering the available options
The potential outcomes are explored, including whether the business can continue trading, whether a sale of the business or its assets may be possible, or whether another solution would provide a better outcome for creditors.
Rescue the company as a going concern, where possible. Achieve a better result for creditors as a whole than would be likely if the company went straight into liquidation. Realise property or assets to make a distribution to secured or preferential creditors, where the first two objectives are not reasonably practicable.
03
Appointing a licensed insolvency practitioner
A licensed insolvency practitioner is appointed as administrator. From this point, the administrator takes control of the company’s affairs and manages the administration process.
04
Managing the company and its assets
The administrator reviews the company’s position, deals with creditor matters and considers the best way to achieve the purpose of the administration. The company may continue trading during this period if appropriate.
Next steps
Bringing administration to a conclusion
Once the administrator has achieved, or is no longer able to achieve, the purpose of the administration, the process is brought to an end in accordance with the relevant statutory requirements.
This may involve the company returning to the directors, moving into liquidation or being dissolved, depending on the circumstances and outcome.
Administration can provide valuable breathing space for businesses experiencing serious financial difficulties, allowing time to explore whether the company or its business can be rescued or whether another outcome may be more appropriate.
Administration outcome
Administration is a significant step and can have a considerable impact on the company and its directors. Once an administrator is appointed, the administrator takes control of the company’s affairs and the directors’ management powers are restricted. Directors will generally be expected to provide information and assistance to the administrator throughout the process. Administration can offer an opportunity to preserve a viable business, protect value and explore alternatives to immediate liquidation. However, it is not suitable for every company, and the circumstances will need to be carefully assessed by a licensed insolvency practitioner.
Director Support Group
How we can help
We understand how stressful it can be when a business is facing serious financial difficulties and creditor pressure is increasing. We can help you understand the administration process, talk through the challenges facing your company and connect you with an appropriately licensed insolvency practitioner who can assess your circumstances and provide formal advice. Our aim is to help you understand the available options, so you can make informed decisions about the future of your business. If your company is facing serious financial pressure, exploring the available options early can make a difference.