The number of companies entering administration has sky rocketed as it hits its highest levels since March 2020 when the country first went into lockdown. With the rise in cost of living, it is no surprise that businesses are facing financial worries, increasing debts, and the looming possibility of insolvency proceedings such as administration.
Statistics have shown that there has been a 34% increase in administration rates compared to previous years with 228 companies entering administration in the first quarter of the year alone. Therefore, it is no surprise that many business owners are worried about the future of their businesses.
Administration, What Does It Mean for Your Business?
As administrations are on the rise, it is important to understand what it means if your company is facing administration.
A company is placed into administration when it can no longer pay its debts as they fall due or when the it’s liabilities outweigh its assets.
The key thing to remember is that administration is very much a rescue procedure and the role of the administrator is to facilitate that rescue, despite the common perception that it is an administrator’s job to close down the company.
Closure of a company is really a last resort. The administrator’s job is to immediately review the business to establish if the company can continue trading, whether that be for a matter of days or, in some circumstances, months. Whilst the company is trading most administrators are effectively running a marketing operation to search for a buyer and keeping the business going creates the time in which to find one.
If the 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.
If you are looking for legal advice around administration or other insolvency matters, our team at Farleys can help. Get in touch today on 0845 287 0939, contact us by email or use the online chat below.