What is the process of Administration?
Administration is a Court based insolvency process, designed to protect businesses from creditor action.
Administration is generally more appropriate for companies with a larger asset base, where there will be a tangible difference in the outcome than what would be the case if the company was placed into liquidation. Alternatively, if a secured lender has concerns over the viability or asset position of the company and therefore its security, they may appoint an Administrator under the terms of their debenture.
Only a licensed insolvency practitioner can be appointed as an Administrator of a company.
An application to place a Company into Administration can be made by the Company itself, its directors, a creditor or a secured lender with a qualifying floating charge. Depending upon certain conditions, that application may be an ‘out of Court application, or a full Court hearing may be required.
An Administration must achieve one of three statutory purposes:
- Rescue the company as a going concern
- Achieve a better result for creditors than what would be achieved through liquidation.
- Realise assets for either Secured or Preferential creditor.
Sometimes the administrator will choose to trade the business during administration if he thinks that it can be rescued as a going concern or if it is considered beneficial for creditors.
What is Pre-pack Administration?
A Pre-pack Administration is simply an Administration where the sale of the business and assets is negotiated prior to the Company being placed into Administration and the sale is completed shortly afterwards. It is a useful tool which can ensures that there is little or no disruption to the trading business.
Reasons for Pre-pack Administration
- To protect the continuation of trade
- There is not enough funds to allow the business to continue trading once the administrator has been appointed
- The administrator has identified certain risks associated with allowing the business to continue trading, particularly those that could have a negative impact on a potential sale
- To preserve jobs
If you would like to discuss the prospect of placing a Company into Administration with one of our Licensed Insolvency practitioners then please contact Insolve Plus on 020 7495 2348.