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A Dummies Guide to Company Administration

Administration is an Insolvency mechanism engineered to protect your company from its creditors including HMRC, your landlord and the Bank. Administration is extremely powerful at protecting your company from aggressive creditors whilst a rescue package is put in place for your company.

Key Components of Administration

The company who wishes to go into Administration must;

• Be of a reasonable size
• Have a reasonable and verifiable cash flow
• The company's profitability must be verifiable - i.e via historical accounts
• The company must be insolvent or the directors must have reasonable grounds to believe that a hostile creditor will affect the company's future

If your company has no tangible assets or you do not believe in the company's future viability then the creditor's voluntary liquidation may be a more suitable insolvency tool.

Who can Appoint an Administrator

The directors of the company will need to formally instruct a duly authorised Insolvency Practioner (IP) to manage the company's affairs.

We will always work with the company's key directors, accountant and suitable employees prior to the appointment of an IP to confirm the company is indeed insolvent and to identify whether the company requires formal restructuring.

We will also work with you to help determine what the objectives of administration are and what the associated benefits and risks of administration will be.

When would my Company Consider Administration?

A company is placed into administration to achieve one of the following objectives;

• To make operational changes to the structure of the company such as annexing certain divisions, changing the key management of your company in order to rescue the business as a going concern.
• Help achieve a better price for the company's assets than what would be achieved if the company elected a creditors voluntary liquidation.
• To realise the company's assets in order to make a distribution to any number of the company's secured creditors.

How long does my Company stay in Administration for?

Typically a company goes into administration; the term however can be extended if the court and or your creditors are agreeable to this. However IPs is under a legal duty to conclude the

objectives of the administration as soon as practically possible any delay can result in regulatory sanctions.

How does Administration protect my company?

When your company is placed into administration, then the company will be protected from the following situations;

• All pending or current winding up petitions will be suspended or most likely dismissed.
• There will be am agreed moratorium period in which all legal proceedings and action against your company will be halted.

Do not speak to an Administrator before you speak to us. Once you have appointed an Administrator it really is too late to change your mind!

Types of Administration available

Administration followed swiftly by a Company Voluntary Arrangement CVA

Very often company owners contact us when they have been served with a Winding up petition or when they are aware that an aggressive creditor such as a landlord, HMRC or the bank is going to force the company to close.

In such circumstances the only rescue mechanism available is to place the company in administration. This protects the company and allows us to work with you in formulating a rescue plan via a CVA.

To try and explain the process sometimes makes it seem a lot more complex than what it is. However we have produced a unique flowchart to illustrate the process.

Administration followed by CVA - please click to view our unique flowchart.

Administration to achieve a Better Result

As previously outlines Administration can be used as a mechanism to protect your company from an aggressive creditor. The administrator who is then appointed is able to if required sell your business as a going concern!

This can be a very strong Insolvency tool which prevents creditors from forcing your company to liquidate and very often allows the business owner to see a much better return than in liquidation.

Pre Pack Administration

Quite simply it does what the name implies. You as the company's director along with the other directors or a third party agree to buy the company's assets of the administrator.

The process requires for your company to be placed into administration. This then means that the your company is relieved of any onerous contracts, unsecured debts and un-necessary staff. A new company is then able to purchase the assets of the old company from the administrator.

It is not un-normal for a pre-pack administration to be carried out over the course of a weekend. It is an extremely effective and cost efficient way of streamlining a viable business!