Company Administration is a formal insolvency process where the control of the business is passed to by directors and creditors to a third-party administrator, normally a licensed insolvency practitioner. In the right circumstances, this can prove to be a powerful method to keep the company alive.
An Administration is sought by companies that are, or are about to become insolvent, with a view to either rescuing the business as a going concern or allowing for a better outcome for creditors than an alternative procedure (such as a company winding-up) will allow.
A company that goes into Administration will benefit from a legal stay against creditor action, which can be a lifeline for potentially viable businesses that are struggling financially. One of the main benefits of an Administration is that it allows trade to continue by transferring business and employees to a newly created company as part of the sale, which often saves many jobs.
As part of the standard Administration process, appointed Administrators will take responsibility for managing and marketing the company, and often running the sale process of the business and its assets. This differs from a Pre Pack Administration, where a sale is negotiated before the appointment of Administrators.
TUPE issues apply in Administration – under the Transfer of Undertakings (Protection of Employment) Regulations 2006 the new company has to adopt the employment rights of employees and may not remove employees.
An administration is often recommended when:
- An otherwise viable business is facing financial pressures
- A business needs to be sold quickly due to insolvency
- Creditors will not agree to an out of court settlement or an alternative course of action
- Agreement is not possible within a reasonable timescale
If you are concerned about your business, and would like to have a confidential talk with a senior adviser, please complete this form: