Going into Administration
Here at The Insolvency Experts, we help our clients around the UK to understand the process of administration, ensuring that all of their questions are answered and they are fully informed at each stage.
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Four Key Questions on going into administration
What does it mean when a company goes into administration?
By going into administration, you are taking action to attempt to protect against the serious threat being faced from mounting financial pressure. It is vital that you hire professional insolvency practitioners who can offer expert advice and guidance at all stages of the administration process. Once an insolvency practitioner has been appointed, either by you or by a Court Order, there is a moratorium placed around the company. This puts a stop to all legal actions being taken against the company until the administration process has been completed.
The aims of the company-specific administration must be discussed with all finance providers, such as a bank or lender that has provided credit with security, before applying to the High Court to enter administration under a streamlined process. It is possible for a company and its directors to put in motion this process of administration, but it is also possible for the secured creditors of a company to apply for administration proceedings to begin, if the terms of their security have been breached and they consider that they’re unlikely to recover debts they’re currently owed.
When discussing with creditors the aims of the administration, the charge holder (whether a fixed charge or a floating charge) will have to provide permission for the administration process to begin. All in all, there is a required notice period of five days before anything can begin.
How Long Does Administration Last?
If you are a director of a company going into administration, you will understandably want to know the mechanics in greater detail, such as how long the process is likely to last. It is important to understand right from the off that every single case of a company entering administration is unique. So, the process of going into administration will differ depending on the specific situation of the company applying for the process to begin. Administrators may consider it appropriate to trade the business for a short period in Administration.
In this scenario, the administrators that have been appointed to run the company will adapt the employment contracts of the company after 14 days, so the business will have been sold, or shut down before that date has arrived. The appointed Insolvency Practitioners are not allowed to run the company at a loss, as they are tasked with ensuring that the interests of creditors are protected. Any trading period will depend on whether there are large amounts of money that have to be collected, or if there are substantial assets to be realised.
If there are large amounts in both cases, then it is likely that the trading period will be lengthened to accommodate this and to maximise the realisation of assets with a view to repaying the creditors of the company. It is vital that during this stage of the administration process, the creditors are met with on a regular basis so that they are fully informed on proceedings and the overall anticipated outcome.
What Options Do I Have When Going into Administration?
We’ll take a look at two other options for a company going into administration. The first is related to pre-pack administration, or a pre-pack sale, and the second is a process of administration followed by a CVA.
Pre-Pack Administration – A pre-pack administration sale is a popular method undertaken by directors of companies in trouble of going into administration. The proposed Administrators would begin negotiations for a sale of the business and/or assets to a new company (newco) or to a 3rd party company that is already in existence, prior to the appointment of Administrators being confirmed. Once the negotiations are concluded, the Administrators would be approved and immediately complete the sale on appointment. What this ensures is that the business, brand and assets themselves are protected.
Administration and CVA – A Company Voluntary Agreement (CVA) is a legally binding agreement that is made between your company and your creditors. It means that you are in agreement to allow for a proportion of debt to be paid over a longer period of time, not right now. In order to be accepted, 75% of creditors have to support the proposal. Once the proposal has been accepted, the directors are handed back control of the company from the administrator. A CVA helps improve company cash flow and cut costs in the near future, giving some breathing space.
How do I find the right help with going into administration?
When a business is in a crucial stage of facing down insolvency, it is important to have experts on your side at all times, in order to guide you through the entire administration process and offer advice as to the best options for your specific situation and potential future. No matter the financial situation of your company, it is always good practice to begin negotiations with creditors as early as possible in the process, helping to create potential payment plans before it gets to the stage of selling off assets as part of administration.
Going into administration is a worrying proposition for any business, but remember that you do not need to face the process alone. The team here at The Insolvency Experts have vast experience in all aspects of a company going into administration, placing us in an ideal position to offer specialist advice on the matter.
We hope that this short summary has helped you to answer some of the questions you may have, including ‘what does it mean when a company goes into administration?’ but if you have any further questions, or want to enlist our services to begin an administration process, our team are here to help. Contact our team at The Insolvency Experts by phone or email today and we’ll be happy to offer an initial consultation on your current financial situation.