What is company administration?
If your company is in financial distress and insolvent, placing it into Administration could provide legal protection from creditors and give your company breathing space, whilst the financial position is assessed and a plan is put together by an experienced Administrator.
This can lead to part or all of the business continuing to trade under new leadership, saving jobs and minimising the impact of the company’s financial position on the business’ reputation.
The administration procedure is an alternative to liquidation, with its primary purpose being to rescue the business. If you believe that there is a future for your business, either through a sale, or a restructuring exercise, administration gives it protection and a period of time to allow this option to be explored.
An Administrator can be appointed out of court by the holder of a qualifying floating charge (for example a bank or finance company), or by the company or its directors, or also by the court, on the application of one or more creditors.
Once in administration, the company’s affairs are managed by a Licensed Insolvency Practitioner and it may continue to trade whilst a rescue plan is put together. An administration must achieve one of these 3 purposes:
- Rescuing the company as a going concern
- Achieving a better result for the company’s creditors as a whole than would be likely if the company were liquidated, or
- Realising the assets of the company in order to make a distribution to one or more secured or preferential creditors.
The administration period automatically ends after 12 months unless the Administrator applies to extend it, or follows one of the various exit routes available to it.
