Administration
Administrators can be appointed by either the company’s directors, or by the company’s secured lenders through a court process.
Administration is a formal insolvency process whereby an insolvent company is under the control of an appointed Licensed Insolvency Practitioner(s) acting as Adminstrator(s), providing protection from creditor legal action, whilst pursuing its rescue options and duties to creditors.
What is the aim of an Administration process?
Administration is a powerful insolvency tool which can be used to rescue and rehabilitate insolvent but potentially viable companies. Administration can be used if one of the three possible statutory purposes are likely to be achieved, in order of preference:
(1) Rescuing the business as a going concern
(2) Achieve a better result for the company’s creditors as a whole than would be likely if the company were wound up (without first being in administration)
(3) Realising property to make a distribution to one or more secured or preferential creditors
How does an Administration work?
Once an Administrator is appointed, he/she will write to creditors within eight weeks of the appointment and Companies House to confirm that the company has entered Administration. A company in administration is protected from creditor legal action, including winding up petitions and certain court actions.
What is a pre-packaged Administration?
A “pre-pack” is an arrangement where the sale of the Company’s assets and transfer of its staff are negotiated prior to and completed at the appointment of Administrators to the company. The Administrator will likely have to adhere to SIP 16 requirements, which can involve the requirement for an independent valuation of the Company’s assets.
