Company Administration (Administration)

If there is a chance of recovery, Administration offers a period of statutory protection
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What is a Company Administration?

Administration is an insolvency procedure that allows an insolvency practitioner (acting as the administrator) to attempt to rescue a company. It is governed by the Insolvency Act 1986. The objectives of the Administration are laid down in the Act and these could include rescuing the company as a going concern or selling the company's assets.

The procedure provides an insolvent company, a period of statutory protection against any creditor action. It is designed to help struggling but potentially financially viable companies, by giving them the time required to formulate a business strategy to allow recovery.

For example

A company is being pressured by creditors (i.e. - a landlord, HMRC, bankers, credit card companies, etc.), or maybe even a winding up petition is being sought through the courts. Seeking the protection of Administration would halt any action being taken against the company. The Insolvency Practitioner and the directors are then allowed time to work out the best course of action.

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Administration

Frequently Asked Questions

  • Cessation of legal action
  • Any legal actions being taken by creditors are immediately stayed. This would mean the company would be protected from the possibility of compulsory liquidation or any other legal action during the administration.
  • Continued trading
  • Bailiffs cannot seize assets or take "walking possession" and HP companies or other creditors cannot recover their assets. This allows the business to continue to trade unaffected in most cases.
  • A safe pair of hands
  • Putting the company in the hands of a licensed insolvency practitioner acting as the administrator, ensures that all actions are carried out in the best interests of the company and its creditors.
  • Time to assess
  • The administrator is given time to assess and communicate a clear picture of the company's finances to its directors and creditors. The administrator can then outline the ways in which they intend to conduct the administration and how they intend to release funds for creditors.
A pre-pack administration is an arrangement under which the sale of an insolvent company's assets is negotiated before the company enters into a formal insolvency process. The deal would usually have been agreed before an insolvency practitioner is appointed. Once an insolvency practitioner is appointed as Administrator the sale will take place immediately or shortly after. If done properly this process gives continuity and maintains the value in the business as well as preserving jobs.

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