More often than not, there’s a lot of pressure associated with putting a business into administration, with tight timescales and financial obligations that need to be met.
That’s where we can help here at Farleys Solicitors. With more than 60 years of experience behind us, our administration solicitors have a wealth of specialist expertise to help make the entire process go as smoothly and efficiently as possible, whether you’re a company director, a creditor, or an insolvency practitioner appointed as an administrator.
Administration is a formal insolvency procedure which allows for the reorganisation of a company, or the realisation of its assets, under the management of a licensed insolvency practitioner. This is done under the protection of a statutory moratorium, which prevents creditors from taking aggressive action to enforce their claims against the company.
Administration is best suited to reasonably sized companies with stable profitability and decent cashflow. Smaller insolvent companies with fewer assets and poor cashflow are more likely to be candidates for voluntary liquidation.
Companies generally go into administration either through a court order, or by the out-of-court route.
The court order can be instigated by the company itself, or its directors, or any creditors, or by a liquidator. Alternatively it can be made by the supervisor of a Company Voluntary Agreement, who will make a formal application to the court. (Most frequently, it’s the company directors or creditors who instigate a court claim.)
The out-of-court option is more straightforward, but still requires certain documents to be logged at court. This process can be voluntarily instigated by the company, its directors, or someone who holds a qualifying floating charge over the majority of the company’s assets. If the company fails to meet certain key obligations, this floating charge enables the holder to appoint an administrator without a court order.
A company is deemed to be ‘in administration’ from the moment an insolvency practitioner is appointed as the company’s administrator – either by court order, by the holder of a qualifying floating charge, or by the company itself.
Once the appointment is made, the administrator assumes control of the company’s business and assets, with the intention of achieving one of the following goals:
The administrator’s role is first and foremost to facilitate the rescue the company. Closure is possible, but only as an absolute last resort.
The administrator begins by assessing whether the company can be kept as a ‘going concern’, defined as a business which is able to meet its financial obligations as they fall due.
If the business is still capable of trading – whether that’s a case of days or months – then the administrator essentially begins overseeing a marketing operation, with two main priorities: finding a buyer, and keeping the business afloat until a purchase can be made. Often, the time-sensitive nature of the business’ financial obligations means that the pressure is on for the administrator to procure an early sale.
However, if the company cannot be kept as a going concern, the administrator’s task becomes to maximise the value of the assets for the benefit of the creditors. The most effective way to do this generally involves selling the business for the best possible price on the shortest timescale possible.
This normally involves what’s called a pre-pack sale, in which the sale of the company is negotiated with a buyer before an administrator is officially appointed. Immediately following their appointment, the administrator then finalises the sale. A key advantage of this arrangement is that it avoids the inevitable costs of trading, helping preserve the maximum value of the business.
Farleys Solicitors LLP is a friendly, trusted, and straight-talking local firm with over 60 years of experience in serving clients in Accrington and across the North West. Our administration solicitors draw upon a wealth of knowledge and industry-specific expertise in order to answer all of your most pressing questions regarding company administration.
We know that every business is different, so we always begin by arranging an in-depth discussion with you about your circumstances and those of the business in question, helping our experts to identify the solution that works best for you.
Feel free to get in touch with our Accrington Corporate Insolvency Solicitors today on 01254 367853 or contact us by email.
If a company can’t be kept as a going concern, in most cases the main task of the administrator is to maximise the value of the assets for the benefit of the creditors. In almost every case the best way to do that is to try to sell the business for the best possible price in a reasonably short time scale. Frequently this can involve what is known as a ‘pre-pack sale’