How long can a company be in administration?
Between engaging an Insolvency Practitioner, to the company entering into Administration, a strategy will be devised, but the period of time is typically one to two weeks. That said, the answer to the question ‘how long can a company be in Administration’ is not always a straightforward one. For any company director considering an administration process, there are a range of potential benefits, but you should be aware that:
- Administration is a procedure which is carried out by an Administrator under insolvency laws and isn’t necessarily a quick fix for a company.
Administration procedure to take any longer. However, Administration can take up to 12 months, with possible extensions of up to 12 months further with consent of the creditors or Court. However, if the Administrator has completed their duties before the auto-expiry and satisfied a specific purpose of Administration, the Administration can be completed earlier. Here at The Insolvency Experts, we are well versed in all aspects of the Administration process and will be able to advise on the best options for your specific situation.
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2 key questions on how long can a business be in Administration?
What are the main stages of the Administration process?
Appointment: Entering into Administration can take anything from a few hours to 2 weeks or more depending on the circumstances. The first step is to appoint an Administrator and there are a number of different ways in which one can be appointed. Directors of the company can appoint an Administrator quickly with the guidance of an IP. In this situation a court order isn’t required – the appropriate forms are simply completed and submitted to Court.
If the company has secured creditors holding the benefit of floating charges, 5 business days’ notice of the Administration must be served on the secured creditors. Alternatively, if the business is already in Liquidation or a Company Voluntary Arrangement (CVA) is in place, the IP must obtain a court order before the company can be placed into Administration. This is a longer process as a court hearing must be arranged.
Communication: As soon as is practicable after the appointment of the Administrator, they must obtain details of the company’s creditors and notify them that they have been appointed. The appointment also has to be advertised in the London Gazette.
The Statement of Affairs (SOA): Upon appointment, the directors must provide the Administrator with a statement of the company’s affairs within 11 days of receipt of the request to do so. This will contain details of all the company’s assets and liabilities, and must specify any assets which are subject to fixed or floating charges.
Proposals: The Administrator has a time limit of 8 weeks to submit proposals of intended strategy to the company’s creditors. The proposals will include full details of the Administrator’s appointment, a copy of the SOA (if received) and details of how they anticipate the Administration will conclude.
Decision Procedure: An initial decision procedure to approve the proposals must be held within 10 weeks of the date the company entered into Administration. The creditors must be given at least 14 days’ notice, although this can be extended by the Court or the creditors themselves.
6-month Progress Report: In the event that the Administration process takes 6 months or more, the Administrator must report to the creditors on the progress and file reports to Company House.
What happens next, and how long can a company be in Administration?
There are various options for what can happen next, with the main Administration options being:
CVA: Whilst the Administrator works with the directors to put together a plan for the CVA, the company is protected by a moratorium. If the creditors agree to the CVA, control of the company is handed back to the directors who then continue to run their business. This process can often be completed in a matter of weeks.
Liquidation: If following the Administration, there are assets that still need to be realised and/or a dividend to pay to creditors, this can be done by putting the company into Liquidation. In the Liquidation, the Administrators generally will be appointed as Liquidators and the Liquidation can sometimes be in place for longer than 12 months.
Dissolution: Company dissolution is appropriate when there is no need to put the company into Liquidation. This may happen where there is no money or other assets with which to pay a dissolution to creditors. In this situation, the company will be closed and removed from the company record at Companies House. The Administrator must be satisfied that no wrongdoing has taken place on the part of the directors.