Administration

Do you have a good business which simply needs a second chance? Does the following appeal to you?:

• Full protection from all creditors
• All current legal action against your company is suspended
• An Administrator who has the experience to restructure your company
• You remain in control of the company
• No need to start a new company

In order for a company to be placed into administration the Insolvency Practitioner must be convinced that one of the following objectives can be performed:

• Rescuing the company as a going concern, or failing that;
• Achieving a better result for the company’s creditors as a whole than would be likely if the company were wound up (liquidated) (without first being in administration), or failing that;
• Realising property in order to make a distribution to one or more secured or preferential creditors.

These objectives are sequential in that the Administrator can only move to the second objective if the Administrator considers it not reasonably practicable to pursue the first objective and so on. The intention is to create a rescue culture.
It should be noted that a company administration can only last a maximum of 12 months and is simply a means to an end.
Within these 12 months the Insolvency Practitioner will work closely with the directors to decide on the best outcome for the company. The possible outcomes are as follows:-

• Trade the company out of its financial problems and hand the company back to the directors
• Place the company into Voluntary Liquidation
• Propose a Creditors Voluntary Arrangement (“CVA”) to the company’s creditors

There are two routes into administration; via a court order at a hearing (“court route”) or by filing a form at court (“out of court route”).

The out of court route is the easier and quicker means of placing the company into administration and is the normal route that would be used, unless certain circumstances apply which mean that the out of court route cannot be used. The company, its directors or a Qualifying Floating Chargeholder (someone who has a charge over the company, such as a mortgagee) may use the out of court route.

Certain circumstances mean that it requires a Judge to decide whether the company should be placed into administration and so this is determined at a court hearing via the court route. Normally this route is used when a creditor wants to force the company into administration and must prove to the court that this is the appropriate course of action.