The process of putting a business into administration is a time-sensitive and often stressful process by its very nature, with tight deadlines and financial obligations that need to be met.
That’s where our administration solicitors here at Farleys can help. With over 60 years of experience behind us, each of our administration solicitors draws on a wealth of specialist expertise as they work to make the whole 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 places an insolvent company under the management of a licensed insolvency practitioner, who will reorganise the business, or realise the value of its assets. While this is being carried out, the company is protected by a statutory moratorium, which prevents hostile creditors from taking more aggressive action to pursue their claims against the company.
Administration is a process best suited to reasonably sized companies, with predictable profitability and stable cashflow. Smaller companies with minimal assets and poor cashflow are more likely to be subject to voluntary liquidation instead.
There are two ways in which companies generally enter administration – through a court order, or by the out-of-court route.
The court order can be instigated by any of several parties – it may be the company itself, its directors, or any creditors. Alternatively, it can be made by a liquidator, or by the supervisor of a Company Voluntary Agreement, who will make a formal application to the court. (In most cases, the company’s directors or creditors are the most likely parties to instigate a court claim.)
The out-of-court option is more straightforward, but nonetheless requires certain documents to be lodged at court. This process can be voluntarily instigated by the company or its directors. It can also be made by someone who holds a qualifying floating charge over most or all of the company’s assets. If the company fails in its duty to meet certain obligations, this floating charge enables the holder to appoint an administrator without going through the courts.
A company enters the state of being ‘in administration’ from the moment an insolvency practitioner is appointed as the company’s administrator. This person might be appointed through court order, or by the holder of a qualifying floating charge, or by the company itself.
Once the administrator is formally inducted, they take control of the company’s business and assets, and work towards one of the following goals:
A company administrator will be concerned with the rescue of the business first and foremost, and will only resort to closing it as a last resort.
They’ll start by making an informed judgement on whether the company can be kept as a ‘going concern’ – defined as a business which is judged to be capable of meeting its financial obligations as they fall due.
If the business is capable of continuing trading operations, the administrator essentially oversees a major marketing initiative, in which they search for a buyer while keeping the business afloat until a purchase can be arranged. The pressures of the company’s existing financial obligations often means that the administrator must work within tight timescales to procure a sale at the earliest opportunity.
However, if the company cannot be kept as a going concern, then the primary focus of the administrator will be to maximise the value of the assets for the benefit of the creditors. This generally involves selling the business for the best possible price, on the shortest possible timescale.
One of the most effective ways to do this is via the means of a pre-pack sale, in which the sale of the company is negotiated with the buyer before the official appointment of an administrator. Upon the administrator’s appointment, they can then finalise the sale. This helps to mitigate the potentially heavy costs of trading for the company, preserving 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 Manchester 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 recognise that every situation is different, so we always begin by arranging a detailed discussion with you about your personal circumstances, and the position of the business in question. We can then use this information in combination with our decades of expertise, allowing us to make an informed decision about what would be the most appropriate course of action for you.
Feel free to get in touch with our Manchester Corporate Insolvency Solicitors today on 0161 660 4254 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’