Company Administration
Does your business have the potential to succeed but not in its current state? Company administration could provide the restructuring opportunity you need.
What is Company Administration?
A company entering administration is a company that requires restructuring. Most of the time, this occurs because the company shows signs of insolvency.
Insolvency can appear in a couple of ways, from not being able to pay debts when they fall due to your liabilities being worth more than your assets. Administration provides a structured process to address these challenges whilst protecting the business from creditor action.
What Happens When a Company Goes Into Administration?
Exactly what happens during a company administration depends on the company in question and the situation they are in. All administrations are completed with the aim of restructuring the company.
Restructuring can include helping the business to keep going or maintaining value within the company so that it can be sold. In many cases, the company can be sold back to the directors in something called a pre-pack administration.
An administrator will be appointed to take care of the process. The outcome will be dependent on many factors, including the company's position, financial information, and the secured and unsecured creditors involved.
Advantages of Administration
If administration is right for you, there can be many benefits:
- Opportunity for business continuation — provides a chance for the business to continue in a better way
- Protection from creditors — outstanding creditors cannot take further action during the administration period
- Breathing space — time whilst the company's affairs are corrected; the company may be labelled a 'going concern'
- Professional management — licensed insolvency practitioners will take care of restructuring and communicating with unsecured, secured, or preferential creditors
Who Can Enter Administration?
Insolvent companies can enter administration, but there must be evidence of hope of recovery. This recovery could be in the form of expected cash flow. These companies may be facing creditor pressure due to outstanding debts. They may have even been threatened with compulsory liquidation.
Act Quickly as a Director
You must act quickly when your limited company becomes insolvent. Otherwise, it does not show evidence of you acting as a responsible director. Not acting quickly also puts you at risk of legal action, such as receiving a winding-up petition and facing compulsory company closure.
How Long Does the Administration Process Take?
Most administrations will not exceed 12 months. The majority of them are completed in advance of this time. However, some larger administrations may take longer. Administrators must apply for more time and be able to provide evidence for the application.
At the beginning of the process, you may be able to request an estimated timescale for the administration.
Initial Assessment
1-2 weeks
Restructuring Period
2-10 months
Completion
Up to 12 months total
Things to Consider
Along with the advantages, there are also some disadvantages that you should be aware of before you enter the process:
- Loss of control — company directors face a lack of control and potential scrutiny
- Cost — administration is a powerful process that can become expensive
- Public knowledge — the company going into administration becomes public knowledge
- Employment impact — employment contracts may be affected
Not Sure if Administration is Right for You?
Company administrations don't work for everyone. If you're not sure if it's the right insolvency procedure for you, get in touch with our team at Director First. We'll provide you with honest, confidential advice to help you make the right decision regarding your insolvent company.
Frequently Asked Questions
Common questions about Company Administration
What is company administration?
How long does company administration take?
What happens to directors during administration?
Can creditors take action during administration?
What is the difference between administration and liquidation?
What is a pre-pack administration?
Get Expert Advice on Company Administration
Don't wait until it's too late. Early intervention provides more options and increases the chances of a successful restructuring.