The tight timescales and significant financial pressures associated with putting a business into administration can make it a highly stressful process by its very nature.
That’s where we can help here at Farleys Solicitors. We have more than 60 years of experience behind us, so you can trust our administration solicitors to use their wealth of passion and specialist expertise to make the entire process go as smoothly and efficiently for you as possible – whether you’re a company director, a creditor, or an insolvency practitioner appointed as an administrator.
Administration is a formal insolvency procedure in which a company is placed under the management of a licensed insolvency practitioner, who will reorganise the business or realise the value of its assets. During this time, the company is protected by a statutory moratorium which prevents hostile creditors from pursuing more aggressive legal claims against the company.
Administration might not be the best course of action for every company. Smaller insolvent companies, with limited assets and relatively poor cashflow, are much more likely to be subject to voluntary liquidation instead. Reasonably sized companies with stable profitability and cashflow are more suited to the process of administration.
There are generally two ways in which a company can enter administration – either through a court order, or through an out-of-court route.
A court order can be instigated by the company itself, or its directors, or any creditors. (In most cases, these are the parties most likely to instigate a court claim.) Alternatively, it may be made by a liquidator, or by the supervisor of a Company Voluntary Agreement, who will do so by making a formal application to the court.
The out-of-court course of action is often regarded as the simpler and more straightforward of the two, but still requires certain documents to be logged at court. This 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. In the event that the company fails to meet certain key obligations, a floating charge empowers its holder to appoint an administrator without going through the courts.
A company is regarded as being ‘in administration’ from the moment an insolvency practitioner is appointed as the company’s administrator. This appointment might be made via court order, or by the holder of a qualifying floating charge, or by the company itself.
Once the administrator has been formally inducted, he or she takes control of the company’s business and assets, working towards one of the following goals:
The administrator’s role is first and foremost to rescue the company, not necessarily to oversee its closure. While closure might ultimately be necessary in some cases, it’s only as an absolute last resort.
The administrator begins by making a professional judgement on whether a company can be kept as a ‘going concern’ – in other words, whether it is still able to meet its financial obligations as they fall due.
If the business is still capable of trading – whether that’s for a matter of days, or weeks or months – then the administrator essentially begins overseeing a large-scale marketing operation, in which they search for a buyer while keeping the business afloat until a purchase can be arranged. The time-sensitive nature of the company’s existing financial obligations often requires the administrator to work to very tight deadlines to secure an early sale.
If the company cannot be kept as a going concern, the administrator’s focus will be on maximising the value of the assets to benefit the creditors of the business. The best way to do this is often by selling the business for the best possible price on the shortest possible timescale.
Typically, this involves what’s called a pre-pack sale, where the sale of the company is negotiated with the buyer before an administrator is officially appointed. The administrator can then finalise the sale immediately following their appointment. One of the core benefits of this arrangement is that it protects the business from the potentially heavy costs of continued trading operations, ultimately 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 Preston 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 business is different here at Farleys Solicitors, so when you approach our administration solicitors for advice, we’ll always begin by arranging an in-depth discussion with you about your circumstances and those of the business concerned. With this information to hand, we can then draw on our decades of legal expertise to identify a solution that works best for you.
Feel free to get in touch with our Preston Corporate Insolvency Solicitors today on 01772 978680 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’