What Is Company Administration?
Company administration is a procedure where a licensed insolvency practitioner (IP) is appointed to take control from directors in order to rescue a company as a going concern, and achieve a better outcome for creditors, rather than face total liquidation.
Following the Insolvency Act 1986, the process creates a legal moratorium that allows time to assess the best outcome, be it a business restructure, sale of assets or to follow up with a CVA or CVL.
We will carefully review with you to make sure the right process is chosen to deal with your company.
When Is Company Administration Used?
There are several reasons why a business requires company administration services. Our insolvency practitioners have handled many different cases, and have supported business owners as appointed administrators when a company is insolvent or at serious risk of being insolvent. In other words, it cannot pay its debts as they fall due or its liabilities exceed its assets.
Companies benefit from administration when facing winding-up petitions, mounting legal action from creditors, or a sudden collapse in cash flow that threatens day-to-day operations. Company administrators are also appointed following the loss of key contracts, customers or funding, where immediate protection is needed for stability.
By entering administration, the company benefits from a statutory moratorium, temporarily halting creditor action while an administrator assesses whether the business can be rescued, restructured or sold to achieve the best outcome for creditors.
Why Choose The Company Administration Route?
Think of company administration as breathing room to discover the best possible outcome when your business is facing financial challenges. It can be concerning to appoint an administrator to take over, but our specialist business recovery team gives you reassurance that this is a suitable route to take.
Administration gives immediate protection from creditors for eight weeks, allowing the appointed IP to create a plan and proposal for creditors and employees. It also presents the option for the business to continue trading, as well as minimise employee redundancies. However, redundancies may proceed to reduce the company’s outgoings, and restructures, like the sale of valuable assets to regain capital is also common.
These changes will be necessary to lift the business out of trouble and recover, instead of collapsing and facing liquidation.
Why Choose Griffin & King?
At Griffin & King, we specialise in supporting businesses of all sizes and sectors with company administration services. Even if you think there is no other way out for your business, our team has the experience to find solutions you may not have realised existed to deliver a smooth recovery.
On appointment as administrator, we will effectively take charge of running the business. As part of our work, we will speak to your bankers, HMRC and any major suppliers to explain the plan in more detail and get their support. These are delicate negotiations and not all insolvency practitioners have the experience or expertise to do this.
We demonstrate that the sale of assets or business, or restructuring using the administration process, has a better outcome for creditors than any other insolvency process.
We understand that any financial struggle is an overwhelming and scary time. Our approach is always supportive, honest and explained clearly, and ensures the best outcome for your business.
We Handle all the Negotiations for you
As part of our work we will speak to your bankers, HMRC and any major supplier to explain the plan in more detail and get their support. These are delicate negotiations and not all Insolvency Practitioners have the experience or expertise to do this.
On appointment as Administrator we will effectively take charge of the running of the business.
What is the Purpose of an Administration?
Immediately after my appointment as administrator, we will need to obtain an independent valuation of the business, work out a marketing strategy covering a two to three-week period, work out a trading strategy for the business, and so on.
The purpose of the administration is to try to sell the business on the most advantageous terms for the creditors. Usually a sale would be agreed with an entirely independent purchaser or sometimes there might be a management buyout, an MBO, to the existing management.
We need to demonstrate that the sale of the business using the administration process has a better outcome for creditors than any other insolvency process.
Our Business Administration Process
1. Initial consultation
Reach out to our business recovery team and discuss the issues your business is facing. We will explain the options available and how the whole process will work.
2. Appoint us as an administrator
You will appoint us as administrator, either through a court application or an out-of-court appointment, depending on your circumstances, and notify your creditors and Companies House.
3. Independent valuation
Immediately after being appointed administrator, we will obtain an independent valuation of your business, so we can strategise the best plan of action to take.
4. Statement of administration
We will write a statement which fully explains our administration plan, and send it to creditors, employees and Companies House for their approval or amendments.
5. Administration takes control
With everything approved, we will begin implementing our strategy, which could involve restructures, sale of assets or sell your business as a ‘going concern’, meaning trading can carry on as usual.
6. Exit route and end of administration
As your administrator, we’ll proceed with the most appropriate exit route. Whether your directors take back control upon evidence of business solvency, or debts are paid over a long period of time via a Company Voluntary Arrangement (CVA), a purchaser is found for assets or the entire business, or move to liquidation via a Creditors’ Voluntary Liquidation (CVL).
How Long Will The Process Take?
Once a purchaser for the business is found, a sale and purchase agreement will be drawn up. If all goes well, this should be done around week four of the administration. If there are no suitable offers for the business, as administrator, we would ultimately have to cease trading and close the business.
We will arrange for these things to be done as quickly as possible, as time in these circumstances is often scarce. Once decisions have been made, we can be appointed within days.
A report to creditors outlining the strategy needs to be prepared by the administrator and sent to creditors within eight weeks of appointment. No meeting of creditors is required unless specifically requested by the creditors, which is unlikely.
FAQs
Can administration stop a winding-up petition?
Yes, entering administration triggers a statutory moratorium, which halts winding-up petitions and most creditor enforcement actions. However, this is only valid for eight weeks upon appointing an administrator.
Can directors buy back the business?
Directors may be able to buy back the business or its assets through a pre-pack or negotiated sale, subject to strict rules and independent valuations. We’ll explain if this option is available during our company administration services.
Is administration public?
Yes. Company administration is a formal insolvency process and is recorded at Companies House. Creditors and relevant parties are formally notified, and certain details will be accessible to the public.
Does administration affect credit rating?
Unfortunately, administration will negatively impact the company’s credit rating and may also affect directors’ ability to obtain finance in the short term.
Can HMRC object?
HMRC is treated as a creditor and can raise objections, but it cannot prevent administration once the legal requirements are met. Our team will handle all negotiations with HMRC on your behalf.
Can a company trade in administration?
Many businesses continue to trade in administration if it supports rescue, restructuring or a better outcome for creditors.
What powers does an administrator have?
If you appoint us as your administrator, we will have full control of your company, including managing operations, selling assets, terminating contracts and making staff decisions. All our decisions will be made in the best interest of your company and to try and ensure it doesn’t face liquidation and closure.
What happens to directors in administration?
Directors remain in place but their powers are suspended. Their role is to cooperate with the administrator and provide full access to company records.
What happens to employees during administration?
Employees may be retained if the business continues trading, but redundancies can occur. Certain employee claims may be covered by the Redundancy Payment Service.
What happens to creditors in a business administration?
Creditors are notified that we have been appointed as the administrator, and we will act in their collective interests and distribute outstanding debt and funds where possible.