An administration can be a vital tool for a business that can have a viable future with some changes or tweaks.
It can be thought of as a “pause” button for directors to enable them or the administrator to make necessary restructuring decisions that can set the business back on the road to profitability or allow new owners to take charge with a minimum of fuss and no interruption to trade or service.
Find out more about this unique procedure here with the answers to some of the most frequently asked questions we get about administrations.
What is the difference between a company administration and pre pack administration?
A company administration designed to rescue viable elements of a struggling business. Whereas a pre-pack administration the appointed Insolvency Practitioner (IP) prepares the business and its assets for a sale to a suitable buyer at a pre-agreed price.
Can I continue to run my business myself during administration?
Once a notice of appointment is filed in court, for as long as the company is in administration the administrator will have control of the company even if the longer term aim is to enter a creditors voluntary arrangement (CVA).
Who has the ability to appoint an administrator?
Administrators can be appointed by directors, shareholders or even floating charge holders and other creditors.
What is the role of an administrator?
The administrator’s job is to protect their interests and if the business can’t be saved, will close it and look to sell company assets to obtain the best value for creditors.
How long does an administration take?
An insolvency practitioner has eight weeks from their appointment to submit proposals to make the company profitable again.
Once creditors have approved the proposals, the administrator manages the process and ensures the company follows the proposed plan. This can take several months, or up to a year.
If the administrator requires more time, they can apply to the court or company creditors for an extension of up to a further 12 months.
How much does an administration cost?
Costs can vary regarding the complexity of the process but a pre-packaged administration is highly regulated, as a sale should represent the best value for creditors.
Will creditors still be able to chase me for repayments?
No. Administration provides an automatic moratorium preventing creditors from taking further enforcement action which provides necessary breathing space.
Will directors be interviewed if the company goes into administration?
As part of the administration process, the insolvency practitioner is obliged to examine and report on the actions of directors leading up to the administration.
This is usually a straightforward process to determine that all affairs have been handled properly. It is possible, but rare, that if a director is found to have acted improperly then they could be disqualified from being the director of a limited company for a period of time and/or face a fine too.
What will happen to employees during administration?
When an administrator assumes control of a company they have the right to terminate the contract of any employees. Should they keep any employees for 14 days or more then their employment rights are reinstated and should the company enter liquidation they will count as preferential creditors.
Any employees let go will count as unsecured creditors should the company enter insolvency but are entitled to redundancy pay and all other statutory entitlements.
After administration will control of my company revert back to me?
Possibly. If the business emerges from a CVA then it will. If the administrator eventually has to sell the business, the previous management will have an opportunity to buy it, although they will have no input into the sale process.
Every business is different and the situations they find themselves in are different too. Our “BRE Answers” series is not meant to be complete or exhaustive but to provide a basic explainer.
If you want to know more about administration and how they could benefit you then please get in touch with us!
After a free consultation with one of our team of expert advisors you’ll be in a better position to choose your next move and probably with a better range of options than you originally thought you’d have.
All you have to do is pick the best time and date for you and we’ll do the rest.