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What does “Business in administration” mean?

When a business is struggling with financial difficulties this can lead to it being put into administration. At this point, it is put under the management of a licensed Insolvency Practitioner; an administrator, who deals with company affairs and assets.

An IP can be appointed by directors and secured lenders through a court process to try and protect the company.

What happens to a business in administration?

A business that has outstanding debts and can’t pay what it owes can be put into administration. Administration protects your company or Limited Liability Partnership (LLP) from legal action by creditors who are owed money. This also prevents anyone from applying to liquidate the company during this process.

Appoint an administrator

The first step is to issue a Notice of Intention or NOI, a document filed at court which states the company’s intention to appoint an administrator or professional IP. Once an administrator has been appointed, control of the company is passed over to this IP. The company pays the fees for this administrator.

The “business in administration” process

Once the administrator is appointed, they will write to Companies House and all your creditors notifying them of their appointment. They will also publish a notice of this in The Gazette.

Their job from here is to try and stop the company from being liquidated (wound up). This is not always possible and can lead to the IP paying as many creditors as possible from the company’s assets.

They then have a period of 8 weeks to write a statement outlining what they plan to do with the company. This is sent to Companies House and all the creditors who can either approve the plan or ask for amendments at a meeting.

There are several options the IP can proceed with. They could decide to

Close your company if there are no assets.

Sell your company as a ‘going concern’ to another business. This enables the business to continue to trade and means they can keep staff and clients.

Liquidate the company as part of a Creditors Voluntary Liquidation (CVL). The company assets will be sold off with the proceeds being used to pay creditors before the business is closed.

They could also negotiate a Company Voluntary Arrangement (CVA). This is where it’s agreed creditors will be paid over a fixed period and the company can continue to trade.

The “business in administration” process ends when either the IP decides the purpose of the administration has been fulfilled or when their contract ends, which automatically happens after a year.

Do you think your business needs to go into administration?

If your business is struggling and you need some help and advice with regards to administration give us a call on 0800 088 2142 or fill in the form below.

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    Andy Slinger

    Andy is Head of Marketing for Business Helpline with a wealth of experience Marketing in the financial sector. He has a passion for helping business owners struggling with debts.