Administration is an insolvency process involving the management of an insolvent, or going to be insolvent, company that is being given a licenced insolvency practitioner acting as an administrator. Administration helps an insolvent company by giving it the time and legal protection to keep the business on a steady ground, pushing away the threats of winding-up and creditors.
A company is granted a moratorium when it is in administration. This means it is protected against any legal action from creditors or landlords. Bailiffs are not able to take any assets of the company while it is in administration; nobody is able to take possession of company property without the administrator’s permission.
After they have been appointed, the administrator will take responsibility for the management of the company. They will work out a plan in place for the company moving forward, potentially selling the company out of administration or continuing to trade after the restructuring of the company. You only enter administration:
▪️ As a method of rescue for the company
▪️ If administration would create a better result for the company’s outstanding creditors than other options
▪️ You are able to realise any property or substantial assets in order to make a deal towards creditors
The insolvency practitioner (IP), must ask you which of the three above objectives that you wish to pursue. If you cannot meet any of them then administration will not be recommended and your IP will discuss other alternative solutions for you and your business.
Who can put a company into administration?
A company can be put into administration in two ways: through voluntary measures or through the pressure of exterior secured lenders. Either way, a licensed IP will be needed to act as an administrator. They will control the running of the company and they will work out a route for the future, as discussed in the previous question.
In a voluntary liquidation, its directors can appoint an IP of their choosing to be the administrator. However, when the company is forced into administration by a lender, the courts are likely to appoint their own IP – ordinarily down to the lender’s preferred/requested IP.
Who takes charge of the company during administration?
The administrators will take charge of the company during the period of administration.
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