Putting a business into administration is often by nature a stressful process, especially given the deadlines and financial pressures involved.
That’s where we can help here at Farleys Solicitors. With more than 60 years of experience to our name, each of our expert administration solicitors has a wealth of passion and expertise, enabling them 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.
In a nutshell, administration is a formal insolvency procedure which places an insolvent company under the reorganisation of a licensed insolvency practitioner, who will reorganise the business or realise the value of its assets. The company is protected by a statutory moratorium during the process of administration, preventing hostile creditors from taking more aggressive legal action to secure their claims against the company.
Administration might not be the best course of action for every company. Smaller insolvent companies with the fewest assets and relatively poor cashflow are more likely to be subject to voluntary liquidation instead. On the other hand, reasonably sized companies with stable profitability and cashflow are best suited for administration.
A company will generally go into administration in one of two ways – either through a court order, or through the out-of-court route.
A court order can be instigated by one of several parties. It may be the company or its directors, or a creditor – which are generally the parties most likely to instigate a court order – or a liquidator, or the supervisor of a Company Voluntary Agreement, who will do so by making a formal application to the court.
The out-of-court option is more straightforward, but nonetheless requires certain documents to be submitted to the court. It may be voluntarily set in motion by the company, or its directors. Alternatively, it may be initiated by someone who holds a qualifying floating charge over most or all of the company’s assets. If the company cannot meet certain key obligations, this floating charge enables its holder to appoint an administrator without the prerequisite of a court order.
A company is officially regarded as being ‘in administration’ from the moment an insolvency practitioner is appointed as the company’s administrator, whether that’s through a court order, or by the holder of a qualifying floating charge, or by the company itself.
When the administrator assumes his or her position, they assume responsibility for the company’s business and assets, and work towards one of the following goals:
The first priority of any administrator will be on the rescue of the company, rather than to oversee its closure. In some cases closure may ultimately be necessary, but only ever as a last resort.
The administrator will start by making a detailed assessment on whether the company can be kept as a ‘going concern’. A company is deemed to be a going concern when it is judged to be able to continue meeting its financial obligations as they fall due.
If continuing trade operations remains a viable option for the business (whether that’s for days or months), then the administrator essentially begins overseeing a marketing operation, in which they seek to find a buyer for the business while managing the challenges of keeping it afloat until a suitable buyer can be found. The business may have hard deadlines for meeting its existing financial obligations, which means that the administrator must often work quickly to procure a sale at the earliest opportunity.
Conversely, if the company cannot be kept as a going concern, the focus of the administrator will be to maximise the value of the assets for the benefit of the creditors, generally by selling the business for the best possible price on a tight timescale.
This normally involves what’s called a pre-pack sale, in which the sale of a company is negotiated with the buyer before the official appointment of an administrator. The administrator can then finalise the sale immediately following the assumption of their role. This helps avoid the inevitable costs of trading from being incurred by the company, which preserves its maximum value.
Farleys Solicitors LLP is a friendly, trusted, and straight-talking local firm with over 60 years of experience in serving clients in Burnley 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 situation is different, so when you approach our administration solicitors, we make sure to begin with a detailed discussion of your circumstances and those of the business in question. Together with our decades of expertise, this allows us to more informed decisions about what would be the best course of action for you.
Feel free to get in touch with our Burnley Corporate Insolvency Solicitors today on 01282 798664 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’
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