Administration

Administration Orders

If your company is in severe financial distress and insolvent an administration order could provide legal protection from your creditors whilst a restructuring plan is put together. The administration procedure is an alternative to receivership or liquidation with its primary purpose being the survival of the company or of part of its operation as a going concern

An administrator can be appointed out of court by the holder of a qualifying floating charge (for example a bank or finance company) or by the company or its directors and also by the court on the application of one or more creditors.

Once in administration the company's affairs are managed by a licensed Insolvency Practitioner, and it may continue to trade while a plan is put together with the objective of:

1. Rescuing the Company as a going concern, or
2. Achieving a better result for the Company's creditors as a whole than would be likely if the Company were wound up, or
3. Realising the assets of the Company in order to make a distribution to one or more secured creditors

Generally a company entering administration will either leave to enter a CVA, or have its assets sold on.

Pre-Pack Administration

One of the biggest costs associated with the administration process comes from a company continuing to trade whilst in administration, meaning it must bear the cost of the Administrators and their team in addition to its own operating costs.

Because of this, and the reforms made as part of the Enterprise Act of 2002, there has been a significant increase in the popularity of Pre-Pack Administration.

Pre-pack insolvency refers to a deal for the sale of an insolvent company's business and/or assets which is put in place before the company formally enters the insolvency process and an Insolvency Practitioner is appointed – thus giving a significant cost saving.

Pre-pack administration is generally appropriate where a significant value in the company may be lost, for example key staff leaving or assets losing considerable value, once the administration process is announced. For this reason there is usually little or no open marketing of the sale prior to it being agreed.