Administration

What is company administration?

Administration is a way to try to save a viable company in immediate financial distress. A company can be placed into Administration one of three ways:

• A floating Charge Holder can appoint an Administrator

• The Directors/Shareholders can appoint an Administrator

• The Directors/Shareholders can apply for administration

An administrator has the same general powers as the company and/or its directors once appointed. Their role is to take control of the company and assess its financial situation. They will work to develop a plan to help the company recover from its financial difficulties, which may involve selling assets, restructuring the company, or other measures to help the company return to profitability.

Administration provides the following:

1. Company breathing space: Company administration is a legal process that can provide breathing space for the company to restructure and return to profitability, while also protecting the interests of its creditors.
   
   

2. Legal protection from creditors: During the administration period, the company is protected from legal action by its creditors, which gives it time to develop a recovery plan. The company's creditors will be asked to approve the administrator's plan, and they will be given the opportunity to vote on the proposed course of action.

3. Administration exit: If the company is able to recover from its financial difficulties, it may be able to exit administration and continue to operate as a going concern. If it is not able to recover, it may be liquidated and its assets sold to pay off its creditors.

When is it a good option?

Deciding when company administration is a good option for a struggling business can be a complex process that depends on the specific circumstances of the company. 

Here are some general factors to consider when deciding if company administration is a good option:

1. The company is insolvent: If a company is insolvent, meaning it is unable to pay its debts as they fall due, it may be a good candidate for company administration. Entering administration can help protect the company from legal action by its creditors, giving it time to develop a recovery plan.
   
   

2. The company has a viable business: Company administration is typically most effective when the company has a viable business that can be saved. If the company's financial difficulties are temporary, and there is a realistic prospect of the company returning to profitability, then administration may be a good option.
   
   

3. The company has a high level of debt: If a company has a high level of debt that it is unable to repay, administration may be a good option. The administrator can work to negotiate with creditors and develop a plan to repay the company's debts over time.

4. The company's assets are worth more than its debts: If the company has assets that are worth more than its debts, then administration may be a good option. The administrator can work to sell these assets and use the proceeds to repay the company's creditors.
   
   

5. The company's directors want to save the business: If the company's directors are committed to saving the business, then administration may be a good option. It can provide a structured process for restructuring the company and developing a recovery plan.
   
   

The decision to enter company administration should be carefully considered and should take into account the specific circumstances of the company. Seeking professional advice from a licensed insolvency practitioner can be helpful in determining whether company administration is a good option.

Administration Process

Here is a simple step-by-step guide to company administration:

1. Determine the reason for company administration: Company administration is a process that can help struggling companies recover from financial difficulties. It may be an appropriate option if your company is facing insolvency or needs time to restructure.
   
   

2. Appoint an administrator: The first step is to appoint an administrator, who will be responsible for managing the company's affairs during the administration period. The administrator can be appointed by the company directors, by the court, or by a qualifying floating charge holder.
   
   

3. Inform creditors: Once an administrator has been appointed, they must inform all of the company's creditors of the administration. This typically includes sending a notice to all known creditors.
   
   

4. Prepare a statement of affairs: The company must prepare a statement of affairs, which is a document that provides an overview of the company's assets and liabilities. This document will be used to help determine how the company's debts will be managed.
   
   

5. Hold a creditors' meeting: A creditors' meeting must be held within 10 weeks of the company entering administration. At this meeting, the administrator will present a proposal for how the company's affairs should be managed. Creditors will have the opportunity to vote on the proposal.
   
   

6. Implement the proposal: If the creditors approve the proposal, the administrator will implement it. This may involve selling assets, restructuring the company, or other measures to help the company recover from financial difficulties.
   
   

7. Monitor progress: The administrator will continue to monitor the company's affairs and provide regular reports to creditors. The administration period typically lasts up to a year, although it can be extended in some cases.
   
   

8. Length of administration: The administration of a company automatically ends after one calendar year, unless the creditors or the court agree to an extension. In practice, many companies remain in administration for more than one year and complex administrations can last several years.
   
   

9. Exit administration: Once the administration period is complete, the company may exit administration. This may involve restructuring the company, selling assets, or taking other measures to help the company recover.

Please note that this is a general guide to company administration and the specific steps may vary depending on your individual circumstances. It is always advisable to seek professional advice if you are considering company administration.